BTC/USD: Bitcoin Continues to Rise ahead of Twofold Reduction in Mining Rewards

The value of bitcoin appreciated 1.5% in the first week of May, as demand for the cryptocurrency continues to rise ahead of the planned halving of rewards for bitcoin miners on July 12.

The BTC/USD exchange rate referenced by the global cryptocurrency market has risen 1.5% since the beginning of May. It was last seen trading at $459.03 after multiple attempts to break the $470 resistance level.

The technical indicators suggest further upside is in store for the BTC/USD. Relative strength is slightly above 60 and rising gradually, while the MACD remains in positive territory. Price action is strong, with the 20-day and 50-day moving averages trending well above to 200-day MA.

BTC/USD: Bitcoin Chart

The US dollar rebounded from 15-month lows last week. The dollar index, which tracks the performance of the greenback against a basket of six fiat currencies, rose 0.1% to 93.89 on Friday. That was the index’s fourth consecutive daily advance and highest close since April 27.

The price of bitcoin has shown signs of stability in recent months, having gained 11% against the dollar since the beginning of April. According to analysts, the cryptocurrency’s newfound strength and stability above the $450 price point is a sign that investors have become more confident in bitcoin transactions.

Additionally, the anticipated halving of bitcoin’s block reward has also created optimism that supply will not grow as rapidly, which could further support prices. Beginning July 12, bitcoin miners will receive 12.5 bitcoins per block, down from 25 per block. While this could in theory raise prices by halving the number of new bitcoins coming into circulation, analysts say the complete opposite effect is also possible. That’s because the number of bitcoins miners receive is supposed to cover the costs of labour and electricity; a halving of that reward could reduce the incentive to mine and lead to an overall reduction in investor interest. Additionally, analysts are quick to remind investors that the halving of the bitcoin reward won’t actually reduce the supply of coins in the market, but rather reduce the rate in which new coins are added. That means demand will have to grow constantly in order to raise the cryptocurrency’s value.

Bitcoin has come a long way since its founding in 2009. Hundreds of new companies specializing in blockchain technology have come into existence to take advance of the digital currency revolution. Even national governments and multinational investment banks are beginning to experiment with digital currency.

Bitcoin was in the news this week after various media outlets gave coverage to Craig Wright’s claims that he is Satoshi Nakamoto, the shadowy creator of bitcoin. Craig Wright, a self-described security expert from Australia, first laid claim to being the elusive Nakamoto last Monday. He made the announcement in style, involving the likes of BBC, The Economist and GQ magazine.

There was only one problem with his story: it lacked the cryptographic proof needed to convince the bitcoin community that he was, in fact, Nakamoto.

News out of Wall Street this week wasn’t nearly as exciting. US stocks finished down for a second consecutive week on disappointing economic data and dismal corporate earnings.

The Dow  Jones Industrial Average closed down 0.2% over the past five days, despite posting a respectable gain in the final session of the week.

Friday was an active day in the financial markets, as investors learned that hiring in the US economy slowed in April to the lowest level in seven months. Nonfarm payrolls by 160,000 in April, well below forecasts calling for over 200,000, the Labor Department said. Job gains were also revised down by 19,000 in February and March combined.

A weaker than expected jobs report makes it more likely that the Federal Reserve will hold off on raising US interest rates this June. According to the CME FedWatch tool, traders are pricing in only one interest rate increase this year.

Economic data will remain a key focus of the global financial markets next week. China will release key trade data on Sunday, followed by reports on producer inflation and consumer prices.

Meanwhile, Eurostat will release revised first quarter GDP estimates on Friday. The US Commerce Department will report on retail sales, producer prices and business inventories the same day.


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