Bitcoin Valuation Surpasses $7 Billion, Still Short of Historic High

Bitcoin Surpasses 7 Billion Bitcoin’s market cap has surpassed $7 billion for the first time since September 2014. Many factors have contributed to bitcoin’s resurgence, but the hype over the $7 billion USD valuation fails to capture the whole picture. Bitcoin was worth about twice as much at the end of 2013, but it has been slow to recover since. There are some other factors that are not as obvious that must be taken into account in order to analyze the merits of that $7 billion USD mark.

Critical Factors

There are mainly 2 ways in which bitcoin valuation can go up. Either demand for bitcoin is high relative to supply, therefore increasing the value of each coin, or more coins have come into circulation. A combination of both factors can bring even steeper market cap gains. Given that more bitcoin is constantly coming into the market – even if rewards are halved periodically – the price of bitcoin should be a stronger factor in determining market cap.

The Current Situation

With the next mining rewards halving in July, price should be going up, since overall supply of coins is set at 21 million and less of them should be coming online every time a halving happens. This means that bitcoin’s market cap is expected to rise further, due mainly to the system’s scarcity protocols. This means that even though there will be more coins are expected to come online until the year 2140, the rate at which they will come online is currently undershooting demand. This is supposed to keep prices rising overall in the short term.

Risks Abound

Nevertheless, there are some medium to long term risks to bitcoin, that threaten to keep its market cap potential low relative to its almost $14 billion USD peak. More cryptocurrencies are coming online, with improved features. Apart from that, bitcoin is facing transaction challenges and other technical issues regarding block size that may affect its market cap in the future.

Bitcoin in Decline?

As much as the current increase in valuation is catching a lot of headlines, it is necessary to take the following into account:

  • Valuation was much higher – almost twice as much – with less coins in circulation.
  • The current bitcoin price of around $465 USD – at the time of publication – is less than half of what it got to at its peak, which was close to $1,200 USD.
  • Bitcoin mining rewards are about to halve, but the cryptocurrency is not even close to its historic highs.

All this points to a decline. However, bitcoin has always been a high risk asset, with the capability of rising meteorically just to crash, slashing the value of the money bitcoin users hold. Arguably, if bitcoin finds some kind of stability that would indicate that there is enough maturity in the market to attract more investment. In the meantime analysts and investors that are looking at the bitcoin economy, should not only look at the increase in bitcoin price, but should also keep an eye on the context, including market cap and historic data.

Greenback Slump Continues

USD plumetsIt seems that the downturn in the price of most raw materials due to weaker Chinese economic output, and the ensuing downturn of raw material related currencies, has come to a halt. In some cases, the tables have turned, and the US Dollar has been losing ground to many of its peers, after reaching near historic heights. This could be due to a number of reasons. However the slowing pace of planned Fed rate hikes is likely to be the most influential factor. It seems that the markets overestimated the effect of planned rate hikes, and priced them in a little bit too early. read more…

Oil Recovery Delayed By Middle Eastern Feud

Oil PricesA meeting between OPEC and non-OPEC oil producers on Sunday April 17th to freeze oil output, was supposed to be a done deal. Saudi leadership had other plans in mind apparently. Following a rarely seen level of understanding between OPEC and Russia in negotiations leading up to the meeting, the Saudis shocked oil markets with their decision to bolt, due to their power struggle with Iran. Since the Islamic Republic has declared that it will keep on increasing output until it reaches 4 million barrels of oil per day, the Saudis ultimately made a pragmatic play to counter the move, postponing the recovery of oil prices.
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Deciphering The Brexit Conundrum

British PoundThe campaign for the future of Britain’s involvement in the EU, kicked off officially on Thursday April 14th. Speculators have already flooded the markets with bets. They are primarily betting against the British Pound, which should bear the brunt of the turmoil. It seems that traders are quite confident that Britain will leave the EU. Although this might seem like a sound assessment, given the anti-immigration sentiment in Europe in general, there is reason to believe that logic will prevail. British voters are more likely to reject Brexit than to embrace it. read more…

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The Binary Options Wolf Den

Binary Options a Scam?The binary options industry has always been an industry dominated by dubious organizations. Just recently we have been seeing more and more efforts to expose the overwhelming amount of scammers that run it. Governmental organizations and financial regulators across the globe have been actively looking for the wolves who are running all the scamming activities. It seems that these wolves are particularly crafty and they have been able to avoid legal sanctions with unparalleled guile. read more…

Financial Markets – Preview for Week Starting 24th April 2016

Major Events of Last Week

Financial MarketA number of major geopolitical developments dominated the financial markets last week. For instance, the Yen came under substantial pressure last Friday amid growing conjecture that the Bank of Japan (BoJ) may introduce negative interest rates when it convenes at its next monetary policy meeting later this month. Oil prices continued to surge for the third consecutive week by recording their highest values to date during 2016. The Greek debt crisis again hit the headlines after Athens failed to reach an agreement with its Eurozone partners that would activate the release of badly needed loans and instigate a new bout of debt negotiations. The premier US indices produced mixed reactions last Friday exemplified by the Dow Jones Industrial Average climbing 22 points; the S&P500 falling by 1 point and the NASDAQ dropping by 46 points. read more…

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Santa Effect on Bitcoin?

santa-bitcoinThere is no doubt that 2015 has been full of economic volatility. From the price of oil, to stocks, indices and the economic performance of key countries, it has been a year in which finding a safe haven was an almost impossible mission. From within all the volatility, is seems that one of the best performers was Bitcoin. However, it also dipped after a stark rise in October, but it seems to be picking up steam again towards the year’s end. Maybe it is a kind of ‘Santa Claus Rally’ for a strange mix of investors.
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