Cryptocurrency Market Surging on Fundamental Developments
The world of digital currency trading posted very solid transaction volumes on May 8 as Bitcoin returned to its highly anticipated $10,000 level. The last time the world's most valuable cryptocurrency was priced at $10,000 was in mid-February; at that time, the economic devastation of the coronavirus pandemic had not yet been determined, and BTC ended up falling victim to the downturn of the global markets.
As has previously happened, the entire cryptocurrency market rode the coattails of Bitcoin's rally on May 8. In just 24 hours, the total market valuation appreciated by more than $132 billion, and this increase was largely stimulated by three fundamental signals:
The Bitcoin Halving
Market analysts who believed the blockchain halving event would attract investors to Bitcoin were correct. Starting May 12, the potential rewards that Bitcoin miners can earn will be cut in half from 12.5 to 6.25 tokens. While this translates into a reduction in the Bitcoin money supply, it has historically increased demand in the days prior to the halving date, which comes around every four years.
The State of the Global Markets
Cryptocurrencies are slowly gaining status as financial assets correlated to the global financial markets. After the sheer drubbing that major stock exchanges experienced during the early days of the coronavirus pandemic, investors seem to be regaining confidence in the ability of central banks and financial regulators to shore up national economies. The European Central Bank and the United States Federal Reserve have reaffirmed their dedication to keeping markets afloat by means of generous cash injections and lending programs required to restart economic activities. This is the kind of policymaking that prompts investors to remain active in the market.
Institutional Investors Warm Up to Cryptocurrencies
Bitcoin is gradually becoming a flight-to-safety asset. According to a recent Bloomberg News report, a couple of major hedge fund managers have disclosed their Bitcoin holdings; one of them is Paul Tudor Jones, who has taken a BTC position and gone on the record to say that he is evaluating this cryptocurrency as a safe haven asset. Another digital currency that institutional investors have been looking during 2020 is Ripple, which has fallen as low as $0.22, but which is still considered to be the most business-oriented token in the market.
Cryptocurrency traders should keep in mind that the market is still prone to volatility, which means that the gains made thus far could retreat a couple of times over the next few weeks as some investors rake in profits.