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Bitcoin is rising again: how long will this continue?

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Bitcoin is rising again: how long will this continue?

The future of Bitcoin is still uncertain. Chesnot/Getty Images

Bitcoin is experiencing new highs and has increased by around 50 percent since the beginning of the year.

But recent events, such as the Iranian attack on Israel and profit-taking, temporarily dampened the upward momentum.

Despite high prices, many traditional investors remain skeptical, with about a third of U.S. consumers expecting a significant price decline.

Bitcoin, the most important cryptocurrency, is known for its large fluctuations. But recently, holders have been looking more calmly at their digital wallets as the price reaches new highs. Bitcoin has gained around 50 percent since the beginning of the year. This makes the memory of the sharp price decline after November 2021 fade.

However, recently the Iranian attack on Israel and profit-taking have dampened the warming in Bitcoin trading. As a result, the price fell from around 71,000 US dollars (the equivalent of around 66,690 euros) to temporarily below 61,000 US dollars (almost 57,300 euros). On Friday the price again approached the $65,000 mark (€61,000).

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Investors are facing the fourth halving

The cryptocurrency’s ongoing rise since the beginning of the year is primarily driven by increased demand from several ETF providers, who have been able to launch new Bitcoin funds in the USA since January. This allows investors to invest in cryptocurrency without having to directly purchase and hold the currency. Additionally, the rally is fueled by the upcoming Bitcoin transaction verification reward halving, scheduled for later this week.

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The fourth so-called halving will take place on Saturday morning, according to Bitcoin’s technical protocol. Satoshi Nakamoto, the mysterious inventor of Bitcoin, had limited the maximum number of all Bitcoins to 21 million. According to his plan, Bitcoins should not be made available immediately, but gradually by solving complex calculation problems. The miner who calculates a new block in the public Bitcoin database, the “blockchain”, receives a reward, the “block subsidy”. This helps secure the network and at the same time creates new Bitcoins.

In 2009, at the beginning of the Bitcoin era, the reward was 50 Bitcoins per block. According to Satoshi Nakamoto’s rules, this reward halved every 210,000 blocks, which occurs approximately every four years. The first halving in 2012 reduced the reward to 25 Bitcoins, and four years later it fell to 12.5. Since May 2020, 6.25 Bitcoins have been distributed per block. Now the next halving is approaching, which will reduce the reward to 3,125.

“Cutting the reward for miners to 3,125 Bitcoin will again halve the amount of tokens introduced into the system,” explains Eric Demuth. He is co-founder and CEO of Bitpanda. “According to the principle of supply and demand, this could lead to an increase in the price of Bitcoin if demand continues to exceed the now decreasing supply expansion.”

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US consumers expect price cuts

Peter Grosskopf is a crypto entrepreneur at Unstoppable Finance in Berlin. He also notes that traditionally there have been price increases both before and after the halving. “We have already observed the increase before the halving in the last few months. Markets are psychology. Therefore, history may repeat itself here again. But I’m not a fortune teller and I usually hold back on predictions and speculation.”

Despite the high prices, many traditional investors are skeptical. A survey by Deutsche Bank found that about a third of U.S. consumers expect the price could fall below $20,000 (about 18,700 euros) by the end of the year, which would represent a significant decline and bring the price back to 2022 bear market levels would lead back. Only one in ten of the more than 3,600 respondents believe that Bitcoin will rise above $75,000 (€70,400) by the end of the year, while 40 percent believe the cryptocurrency will thrive in the coming years and 38 percent expect it to it disappears.

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The consumer advice centers in Germany do not consider Bitcoin to be a suitable investment due to the great uncertainty.

dpa

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