The month of April was full of several major market movers starting from the recent Oil crash to the Federal Reserve’s economic bailout. These events have had a major impact on the cryptocurrency industry in April. Therefore, in the cryptocurrency market overview, we will look at the major events that significantly influenced the price of cryptocurrencies and the industry at large. These factors include the Oil crash, Bitcoin Halving, and government bailout packages.
The oil crash
On April 20th, the Oil industry was shaken by an unprecedented event; May’s oil futures contracts traded at negative prices. This was largely due to the unavailability of demand for oil. Many traders who owned oil contracts at the time were paying other traders to take the contracts away from them. Although this was shocking for many oil traders, energy companies were cautious for weeks about running out of storage capacity.
Many investors fled from risky investments and poured their cash into the US dollar. Under normal circumstances, such a cash movement should have spelled doom for the price of cryptocurrencies. However, we are truly living in uncertain times as crypto prices seemed to be unaffected by the risk-off market conditions. The oil price’s crach was one of the factors for the cryptocurrency bullrun recorded in the last days of April.
Although many analysts speculated that the price irregularity was limited to the May contract, the futures contract for June delivery doesn’t seem to be faring any better. At some point, the price of the June contract was around $10.
The whole cryptocurrency industry was on the edge on account of the approaching Bitcoin Halving. This event, which happened on the 12th of May, was a preprogrammed adjustment in the underlying blockchain of Bitcoin (BTC).
Bitcoin runs on an algorithm that requires “miners” with powerful computers to solve complex mathematical problems to validate Bitcoin transactions. Furthermore, the miner that solves a block first is entitled to a certain amount of BTC as a reward. Previously Bitcoin miners received 12.5 BTC per block mined. Every four years, this reward is halved as a way to reduce supply which inadvertently boosts the value of Bitcoin. This halving event brought Bitcoin’s mining reward to 6.25 BTC.
Previous halvings have had remarkable impacts on the price of Bitcoin. This year’s halving is also expected to bring the same phenomenal change. Considering that Bitcoin acts as a benchmark for other cryptocurrencies in the industry, a boost in the price of Bitcoin following the halving will cause the whole cryptocurrency industry to grow exponentially in valuation.
At press time, BTC is trading at $9,662 and has a market capitalization of around $178 billion. Experts believe that this month’s halving could send Bitcoin to $100,000 over some months considering historical occurrences.
The Bitcoin Halving is the theme of the crypto industry for the year and rightly so. Therefore, the bull run in April was mostly due to the anticipated halving. This is a concequence of investors flooding Bitcoin out of the fear of missing out on another major bull run.
The third major event that gave cryptocurrencies a boost in April was the bailout actions carried out by governments across the globe. Additionally, in a bid to cushion the economic impact of the pandemic, governments and central banks were handing out stimulus packages to its citizens and to SME businesses to keep them afloat. Also, they have made pledges to do more should the need arise.
In the United States, the Federal Reserve began injecting cash into the economy and stated that it will keep doing this for a while. This action will give Bitcoin a boost in intrinsic and actual value as traders and investors will no longer see the US dollar as a good store of value and will redirect their cash to Bitcoin. Meanwhile, this will bolster the overall value of the crypto industry.
Also, many governments are grappling with logistical difficulties in dispersing these packages and are trying to come up with more efficient methods for distribution. In the United States, tens of millions are now jobless and need this stimulus. However, the government cannot write cheques fast enough to get to all citizens in need.
Moreover, this problem opened up an opportunity for the utilization of cryptocurrency and digital wallets. Otherwise, if every citizen was given a digital wallet on the blockchain, stimulus from the government would get to its addressed recipient instantly. This is a move that some US politicians are already considering. For example, a member of Congress is sponsoring the Automatic BOOST to Communities Act, which is geared towards giving $1,000 to US citizens every month for up to a year even after the pandemic blows over. Additionally, an addendum to the bill charges for the use of a digital public currency wallet to allocate this bailout. Moreover, experts believe that this bill if passed, is going to be very advantageous for the cryptocurrency industry.
Also, numerous websites also reported that many Americans were using their stimulus to purchase Bitcoin.
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