Bitcoin Needs New Money – Can Russia Provide the Stimulus?

Although the last 13 months have been extremely painful for traders, hope is not completely lost.  Bitcoin (BTC) appears to have stagnated between 3,200 and 3,800.  One of the main problems is that there is a lack of money flowing into the markets.  Many traders lost incredible amounts of money during the past 13 months as Bitcoin, and many altcoins, tanked beyond anyone’s wildest imagination.  There have been a lot of articles speculating about potential reasons why Bitcoin might surge in the near future.

Possible Catalysts

Two commonly discussed catalysts are the 2020 Bitcoin halving and Lightning network.  When Bitcoin was first introduced in 2009, miners received 50 bitcoins every 10 minutes.  The coin was setup so that approximately every four years from inception, the code halves, resulting in miners receiving 50% fewer coins every 10 minutes than previously.  The code halved in 2012 and 2016.  The next one is currently set for May 25, 2020.  Since each of the previous halving events resulted in a big Bitcoin surge, more than 200% gains, it is speculated that a rally may start as early as May 2019.  Whether history repeats itself remains to be seen.

The other possible catalyst that is commonly mentioned is technological advancement due to the lightning network.  One of the main flaws with Bitcoin is scalability.  While Visa can process an average of 24,000 transactions per second, Bitcoin can only handle 7.  When Bitcoin’s price exploded early last year, the network was clogged up because everyone was taking part in the Bitcoin frenzy.  This created massive problems.  For Bitcoin to accomplish its goal of being a universal currency, scalability must be improved.  The lightning network will make that possible and could result in more merchants adopting Bitcoin as a means of payment.  That would certainly be a boon for BTC, but the jury is still out on that.

Bitcoin Needs New Money

The Bitcoin halving and improved scalability from the lightning network could very well result in rallies.  But more than anything, what BTC needs is new money.  Many traders have lost nearly everything during the past year.  A few will probably stick it out but many more have probably left the crypto markets forever (or at least for a very long time).  Just like with all other types of financial markets, what drives prices is supply and demand.  And right now, the demand is lacking.  But perhaps that is about to change.

As reported in major media publications like Fortune, Russia may be taking the steps necessary to diversify its holdings into BTC.  The main reason for needing to diversify into BTC would be if the U.S. slaps on additional sanctions.  The Central Bank of Russia has more than $450 billion in reserves.  The best time to diversify those holdings would be before additional sanctions are put in place, not after.

Vladislav Ginko, an economist at the Russian Presidential Academy of National Economy and Public Administration, said that the transition from USD to BTC could start as early as February.  “I believe that the time is coming when other countries will start doing that and Russia has a brilliant chance to invest into heavily oversold Bitcoin,” Ginko said.

Wrap Up

While the Russian investment is still speculation, it’s clear that BTC desperately needs new money to pour into the market.  If Russia doesn’t buy BTC, another opportunity for new institutional money will be when Bakkt is finally introduced.  Bakkt was supposed to be up and running by now but due to the bear market and regulatory hurdles, the wait continues.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.