Rising global economic worries and a weak US dollar are likely to push more investors into cryptocurrency as it is now recognized as a good investment alternative.
The fixed supply of bitcoin will further lift price up throughout the year, analysts from Bloomberg predict. Based on their 2020 crypto forecast, the price of bitcoin could breach past its 2019 record and restore the $14,000 high at a time when a sluggish US greenback and stock market volatility is continuing and geopolitical tensions are rising.
The initial reaction of Bitcoin to the U.S. drone attack that killed Iran's top military commander was "a good test for the presumption that the first-born crypto matures to a digital gold edition," the Bloomberg study bared. Bitcoin jumped for the first time since 2013 to a seven-week peak on Wednesday as the gold soared to a seven-month high of $1,600.
Bitcoin has long been regarded as "digital gold," partly because it is a limited asset that cannot easily be increased to meet changing demand, much like the popular yellow metal.
The anticipated halving event set later this year will reduce block rewards from 12.5 BTC to 6.25 BTC, with additional supply constraints seen to continue to increase.
The supply of Bitcoin is expected to grow by approximately 2.5 percent this year, which would be an all-time low. This is due in part to the block reward halving. Supply could well drop below 2 percent in 2021, analysts say.
Bitcoin and gold are not all projected to share such a strong bond. Mati Greenspan, founder of Quantum Economics, specializing in cryptocurrencies and foreign exchange, characterized such a relationship as "bad" and noted that until recently the connection between the two assets was negative.
Bitcoin was also prone to short, sharp volatility periods. The asset soared above $10,000 after China's President Xi Jinping called on his country to speed up its blockchain technology adoption before retracing its former range weeks later.
For some observers, this instability profoundly contradicts the argument; at least for the time being, that bitcoin is a stable source of value.
But while the world's most sought-after digital currency may still be too unpredictable to the taste of many people, investors in the asset class tend to increasingly value electronic assets that can sustain some sort of stable price.
The Bloomberg report predicts that the market cap of bitcoin is likely to continue to expand this year, with many alternative cryptocurrencies struggling to keep investors out of supply demand.
