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Cryptocurrency prices surged on Thursday, led by a big jump in bitcoin.
The entire market capitalization or value of cryptocurrencies jumped $35.3 billion in 24 hours as of 2.19 p.m. Singapore time, according to data from CoinMarketCap.com.
Bitcoin, which accounts for most of that movement, was at $9,388.30 — or up 18.57% in the last 24 hours as of 2.03 p.m. Singapore time, Coindesk data showed. That’s the highest level since March 7.
Cryptocurrencies saw two major bouts of selling in March amid the broader plunge in equity markets. But they have now recovered that ground.
Industry participants attribute this to two factors — central bank monetary policy as well as an upcoming event known as bitcoin halving.
Major central banks around the world have unveiled huge stimulus packages to cushion the economic fallout from the coronavirus pandemic. They have also signaled their willingness to do more. This has been a factor behind the recent rise in stock markets in past few days, and has filtered through to bitcoin and other cryptocurrencies.
“My sense is that overall markets are not reflecting reality on the ground though, but this is also the result of the Fed in the U.S. being extremely clear that they will do anything to make sure there is economic stability,” Vijay Ayyar, head of business development at cryptocurrency exchange Luno, told CNBC. He was referring to the U.S. central bank that pledged to keep its benchmark interest rate near zero until the economy recovers.
“We could be seeing a lot of money flowing into equities and crypto as well, as a result of the new money printing.”
An event known as bitcoin “halving” is happening in May and it’s to do with a pre-programmed change in part of bitcoin’s underlying technology known as blockchain.
The bitcoin world works with so-called “miners” with high-powered computers competing to solve complex math problems to validate bitcoin transactions. Whoever wins that race gets rewarded in bitcoin.
Currently, miners are rewarded 12.5 per block mined. The rewards are halved every few years to keep a lid on inflation. By May 2020, the reward per miner will be cut in half again, to 6.25 new bitcoin.
This essentially reduces the supply of bitcoin coming onto the market. Halving is an event that happens every four years. Previous halving events have preceded big price increases in bitcoin.
“While part of this rebound may be explained by a renewed ‘risk-on’ attitude of global investors, it is also clear that bulls have been triggered by the upcoming halving event and the anticipated appreciation in value in the wake of it,” said Matthew Dibb, co-founder of Stack, a bitcoin index fund provider.
“For those buying into bitcoin now, many see this as an opportunity to buy BTC at bargain basement rates before a price pop post halving.”