The turbulent history of Bitcoin continues in 2020, with the cryptocurrency struggling to regain the milestone value of $10,000 – only half its peak value of nearly $20,000 in late 2017.
During the spring and summer, Bitcoin has pushed at the threshold of five figures on several occasions, each time held back by a combination of factors.
What’s holding Bitcoin back?
There’s no one obstacle standing in Bitcoin’s way, but a perfect storm of economic and regulatory worries:
A new normal
The $10,000 threshold has proved more of a ceiling than a benchmark for Bitcoin, so each time it nears that value, traders typically adopt a more bearish approach to the crypto.
Despite cryptocurrencies being independent of real-world currencies, Bitcoin reacts to stock market sell-offs, which hit its value badly in mid-March as the COVID-19 pandemic took hold.
The regulation game
Regulation has been a phantom for Bitcoin ever since governments became aware of cryptocurrencies. Taxation and regulation threaten the anonymity and independent of the crypto – something investors are wary of.
How COVID-19 is affecting cryptocurrency
The global economy has been hit by COVID-19 and the long-term effects are not yet known. Optimists hope for a rapid bounceback, while others expect a protracted and deep recession.
With assets of all classes showing much greater volatility, the world banks are looking for ways to bring much-needed stability into their balance sheets, as required by fiscal prudence regulations.
It remains to be seen whether this will see banks buy large quantities of ‘digital gold’ in the form of cryptocurrencies like Bitcoin – but it’s certainly possible. Some may even launch digital currencies of their own alongside existing fiat coins.
Beyond reactive regulation
One significant possibility is that governments will take this opportunity to move beyond reactive regulation of cryptos – essentially, playing catch-up by trying to apply existing fiat rules to cryptocurrencies.
While regulation may be off-putting for some investors, it could bring Bitcoin into the mainstream, creating a global regulatory environment to facilitate international transactions more easily and securely.
In turn, this could bring in institutional investment, securing the future of the major cryptocurrencies and finally bringing a sense of stability to Bitcoin’s benchmark price.