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It is now the first time that the Bitcoin price has surpassed the $10,000 mark since 2017. There are several speculations behind this Bitcoin surge and the overall crypto market may witness a bull phase resulting in significant recovery of beaten down prices of all major cryptocurrencies and the crypto market in general.
According to a recent analysis, Facebook launching its own Bitcoin rival Libra and the Federal Reserve rate cut are two of the main reasons that might drive Bitcoin to higher levels. Apart from that, a growing perception of Bitcoin as digital gold while it is increasingly regarded as a safe haven asset in periods of uncertainty and crisis, i.e. Brexit, is another factor that may drive the Bitcoin rally forward.
The possibility of a Fed rate cut in July, which appears more and more likely, has aided in pushing the US dollar lower; this has been viewed as a positive for Bitcoin. Bitcoin and gold are alternative currencies which should witness a significant increase in their prices when central banks reduce the value of government-backed currencies or cut the Fed rate.
As suggested by Fed Chairman Jerome Powell and Bank of England Governor Mark Carney, central banks should look at Bitcoin and other major cryptocurrencies positively. This ultimately means an appropriate regulation resulting in reduced volatility of Bitcoin and more legitimacy in the global financial markets.
The Impact of Facebook Libra on the Bitcoin Price
Now, there’s Facebook. The social media giant has recently launched its own cryptocurrency Libra. This crypto launch has been viewed as a fuel that might propel Bitcoin and other cryptocurrencies out of the shadows and to a more mainstream audience. This may lead to more and more people towards accepting cryptocurrencies as an actual method of payment instead of treating crypto as a dubious investment opportunity.
London Capital Group’s head of research, Jasper Lawler, stated:
“Libra will expose 2 billion Facebook users to crypto. Because of its huge network of over 2 billion users, Facebook products cast a wide net. Libra will breed familiarity of cryptos to a much wider audience. Two billion people will now be much more open to Bitcoin and other altcoins.”
However, Libra can also be a potential threat for Bitcoin if it will take its place as the number one cryptocurrency by Facebook users. Users may start to prefer a stablecoin like Libra instead of Bitcoin and other cryptocurrencies, which are not backed by various financial commodities.
The analyst Alan McQuinn from the Information Technology and Innovation Foundation, stated:
“While other cryptocurrencies, like bitcoin, are known for their volatility, Libra will be stabilized by its operators who will back each unit of cryptocurrency with real-world assets.”
Some even worry about the Bitcoin recovering significantly from bottoming below $3,700 at the end of 2018. Bitcoin has surged almost three times as much from that level which may scare away long-term investors resulting in a bear phase. “The appeal of bitcoin is still too limited for the average investor. It’s very risky and the volatility has been extreme,” said Paul Markham, global equity portfolio manager at Newton Investment Management.