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When will Bitcoin’s price stabilise?

·5-min read
A stock screen showing continuous prices rises a Bitcoin
The volatility in Bitcoin is thought to just be result of it's early adoption phase. So, when will it's price go up and stay there? (Source: Getty)

It’s the million-dollar question, isn’t it?

Bitcoin has had a bit of a tough run this year. Regulators are shutting down mining rigs, and companies with environmental interests are distancing themselves from cryptocurrency until the situation improves. All of this, combined with investors seeking more stable returns amid market uncertainty, has meant Bitcoin has been in a trough.

A big one. In April this year, one Bitcoin was worth around $83,000. Since then, it has been on a steady decline all the way up to the present, where one Bitcoin is worth around $50,000.

But wait - didn’t Bitcoin’s price just rise?

Ah, yes. Ever-so-sensitive Bitcoin did in fact experience a price rise in the last few days.

Amazon - aka one of the world’s biggest e-commerce marketplaces - conspicuously posted a job on Tuesday for someone to lead the site’s digital currency and blockchain strategy.

This led speculators to believe Amazon was going to begin accepting Bitcoin as a payment method. In turn, Bitcoin briefly topped around the US$40,000-mark (AU$54,474).

But, later that day, Amazon denied that that’s what the move meant, saying it didn’t have any specific plans for cryptocurrency. As a result, Bitcoin’s price fell back down to the US$37,000-mark (AU$50,000).

Can you keep up?

So is Bitcoin’s price going to rise anytime soon?

The reality is, we just don’t know. However, there are some factors that are playing in Bitcoin’s favour. Let’s take a look.

Big tech players are still on board

Tesla CEO Elon Musk and Twitter CEO Jack Dorsey sat on a virtual panel last week, talking all things crypto and innovation.

Musk revealed that he still had large personal holdings in Bitcoin and Ethereum, and indicated Tesla would accept Bitcoin payments in the future, if miners started to use renewable energy sources.

It reinforced what he said on Twitter earlier this year, which was: “When there’s confirmation of reasonable (~50%) clean energy use by miners with positive future trend, Tesla will resume allowing Bitcoin transactions.”

Twitter CEO Jack Dorsey was part of the same panel, and he also spoke in support of Bitcoin, saying it could replace the whole foundation of the financial system, and, interestingly, he believes it could “help create world peace”.

Bitcoin runs in cycles

Like any investment, Bitcoin is cyclical. And it’s a predictable cycle, too. When the amount of Bitcoin on the market halves, as it does every four years, the price tends to surge.

When the hysteria around the halving event dies down, so does the price.

Michael Terpin, a long-time investor in Bitcoin and co-founder of BitAngels, an investment network for blockchain startups, told Yahoo Finance the logic is simple: “Every four years, the number of bitcoins that come onto the market - that are mined - halves. That means every four years, you end up all of a sudden having a much lower supply. And yet, demand is linear.”

Chuck that into any supply and demand graph, and you’ll see that prices will rise when supply is constrained if the demand is there.

The last halving event occurred on 11 May 2020. On that date, Bitcoin’s price was around US$8,821. A year later, Bitcoin’s price soared to US$56,755. Now, while that’s down from an April high of more than US$80,000, it’s still well above the previous year.

So, it could be that Bitcoin’s price is simply following the cycle, and is now experiencing a low right on cue.

Big companies are accommodating crypto

While Tesla may have hit pause on accepting Bitcoin as payment for its snazzy cars, payment platforms like Visa, MasterCard and PayPal are still full steam ahead.

After seeing a large number of their customers use their Visa, MasterCard or PayPal accounts to purchase crypto, these guys are working on making it easier for people to transact with crypto securely.

In fact, earlier this month, global payments giant Visa approved a local startup called CryptoSpend to start issuing Visa debit cards for the startup’s users.

That means those who use the CryptoSpend app to buy, sell or hold Bitcoin can start using their Bitcoin as direct payment at retail stores and hospitality venues that accept Visa.

Could Bitcoin be on a downward spiral to zero?

Haters will always hate. Or, more seriously, there will always be experts and peers who don’t support or believe in Bitcoin.

Hamish Douglass, the co-founder of one of Australia’s largest fund management firms, Magellan, slammed cryptocurrency as “one of the greatest irrationalities...in a very, very, long period of time”.

US Shark Tank judge Kevin O’Leary called Bitcoin a “giant nothing-burger”.

And it’s no secret Bitcoin is not a regulator’s dream. There’s still a lot of work to be done at a Government level to regulate digital currency, and depending on what those regulations look like, it could have a negative effect on the price of Bitcoin.

Ultimately, it’s about your understanding of Bitcoin and the associated risks, and then being comfortable with your decision to hold, buy or sell.

This means if you’re unsure, do your research. Seek out reliable information sources, or engage a professional financial planner or accountant and discuss your investment options.

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