What Can We Expect from Bitcoin this Summer?
The world's most valuable cryptocurrency is more likely to go through a period of market correction before coming back to the top again.
Last week, the price of Bitcoin took a sharp drop after a period of intense fluctuation. Many analysts still believe in a new market high in 2021, but this trend is not unanimously accepted.
A recent report by JP Morgan Bank claims that the Bitcoin (BTC) slump seen in recent weeks is not over yet. According to the bank’s research team, the cryptocurrency futures curve is in retreat, which means that the asset’s price is higher than the futures contracts.
Consequently, some believe that there will be a new Bitcoin crash, as occurred in 2018 when the price of the “digital gold” fell by almost 80%. And you can see many traders filling shorts or put options on several platforms, including Bitlevex and FTX. Let’s see more about it.
Increasing Institutional Adoption
Despite the recent price drops, Bitcoin is still going through a period of intense institutional adoption. Following the example of companies such as MicroStrategy and Tesla, many businesses are betting on Bitcoin as a valuable hedging asset.
According to research made by crypto fund Nickel, a group of 19 companies, with a combined market value of more than USD$1 trillion, already have about USD$6.5 billion invested in Bitcoin.
According to the same report, these companies spent USD$4.3 billion on the acquisition of the cryptocurrency, considering that they all purchased the currency in 2020.
Since the second half (Q2) of 2020, several American companies, many of them listed on Nasdaq, (e.g., MicroStrategy, Square, etc.) have announced purchases of Bitcoin as part of their strategies in the next few years.
Nickel’s report also estimates that ETFs and closed-end funds dedicated to cryptocurrencies in Europe have already accumulated more than 43.2 billion euros in equity.
Recent Upgrade in Bitcoin’s Network
The first update to Bitcoin’s network in four years has been approved by miners around the world. The upgrade is called “Taproot” and it is expected to enter the game in November 2021.
With the new upgrade, the main change affects digital signatures. Currently, the Bitcoin network uses a digital signature algorithm that allows only the owner to spend the amount transacted in Bitcoin, based on a private key.
With Taproot, that same single digital signature can lead to numerous other unreadable and untraceable signatures during transactions. Consequently, BTC owners will have more privacy, as individual addresses will no longer have much exposure on the blockchain network.
Bitcoin’s Government Adoption in El Salvador
El Salvador, a Central American country, recently passed a law recognizing Bitcoin as a legal tender.
In other words, the rule states that any business in the country must find ways to receive and pay in Bitcoin, which is the equivalent of making Bitcoin an official currency within that country’s territory.
Interestingly, El Salvador does not have an official currency, and the currency in the country is the US dollar ($). Essentially, there is no monetary policy there., so interest rates are set in the United States, and El Salvador simply follows the numbers.
Furthermore, it is a small country, where international remittances account for approximately 20% of its GDP – that is, remittances from citizens who have migrated to other countries and who send part of their income to El Salvador to support their families.
Even within the current phase of uncertainty, it’s still safe to say Bitcoin will certainly hit all-time peaks again. Nevertheless, the problem is to predict when this will happen again.
While some experts point out that Bitcoin will have another bull run later in 2021, the world’s most valuable cryptocurrency is more likely to go through a period of market correction before coming back to the top again.