A rally in bitcoin led the cryptocurrency market higher ahead of a major technical event for the digital coin and as industry participants report an increased interest from institutional investors. Bitcoin crossed $10,000 on Friday morning Singapore time, the first time it has hit that price since February, according to data from CoinDesk. The cryptocurrency had pared some of those gains and was trading around $9,900.75 as of 1:39 p.m. Singapore time, still representing a more than 6.4% rise from the day before. The entire market capitalization or value of the cryptocurrency market had jumped by more than $13 billion from the day before, as of around 1:39 p.m. Singapore time. That move had been largely driven by bitcoin which makes up most of that figure. The value of the entire market stood at $268.07 billion. Industry participants said that a number of factors from supportive central bank monetary policy to increased interest from institutional investors has factored into the bitcoin rally.
Bitcoin suffered two bouts of intense selling in March sending it to a low of around $3,867, a price not seen since March 2019. Since then, the price has rallied over 150%. Meanwhile, stock markets, which also saw sharp drops in March, have recovered. The Dow Jones Industrial Average is up 28.4% since its March low. “Overall markets have been bullish since the March lows and this is across asset classes, including crypto,” Vijay Ayyar, head of business development at cryptocurrency exchange Luno, told CNBC. “Money printing by the Fed and other central banks globally have given a lot of confidence to investors that the economy will be supported no matter what.”
Part of the rise in bitcoin’s price since the March low has been anticipation of a technical event known as “halving”. Bitcoin is not issued by a centralized authority like fiat currencies are. That is why it is often called a “decentralized” cryptocurrency. Instead it is governed by code and is underpinned by a technology known as blockchain. Bitcoin’s hash rate decreased by 6%, from 130.47 exahashes per second to 122.64 exahashes per second in seven hours after the halving, according to the data provided by CoinWarz. Despite the decrease, the figure is still above the seven-day average of 120 exahashes per second as calculated by Blockchain.com. Notably, the hash rates of the Bitcoin forks experienced a much severe decline after the halvings.
In the world of bitcoin, so-called miners with specialized high-powered computers compete with each other to solve complex math problems to validate bitcoin transactions. Whoever “wins” this race gets rewarded in newly minted bitcoin. This “mining” activity happens in blocks, which is essentially a group of transactions joined into one. The effect is that the supply of bitcoin coming onto the market is reduced. Previous halving events, which happen every four years, have preceded big price increases in bitcoin.
Bitcoin has often been compared to gold as a so-called safe haven asset during turbulent times for other risky assets like stock markets. However, recently, bitcoin has fallen and risen when stock markets have.