Bitcoin logged its best performance for the month of January since 2013 driven by safe-haven buying as global equity markets remain shaky following the outbreak of the coronavirus from China.
The cryptocurrency was up over 29% in January as the market capitalization or value of all bitcoin in circulation rose by $39.7 billion. The percentage gain was the best since January 2013 when bitcoin was up 54% for the month.
Industry experts said a number of factors including the coronavirus and a return to work after the Lunar New Year holidays in Asia helped prop up bitcoin’s price.
The coronavirus, which originated from Wuhan, China, has spread to other areas of the world. More than 360 people have died in China from the virus. Some airlines have ceased flights to China, companies have halted operations for longer than usual over the holiday period and fears are growing that global growth could suffer.
Nigel Green, CEO of deVere Group, a financial services and advisory firm, called bitcoin a “safe-haven asset in times of uncertainty” and said that is why it’s seen a boost in the past month.
“The ongoing upward trajectory of the price of bitcoin correlates to the spread of the coronavirus,” Green said in a note on Monday. “The more individual cases that are identified, the more countries around the world that are affected, and the greater the impact on traditional financial markets, the higher the price of bitcoin has jumped.”
Meanwhile, trade is picking up following the Lunar New Year celebrations which are observed across a number of Asian countries. Some markets have had extra days off but many people returned to work last week.
“Post CNY (Chinese new year) also I think (played) a big role. Lots of money sitting on the sidelines with the long weekend and last week. We saw this in our Malaysia volumes as well on the weekend, lots of fresh money coming in post the CNY break,” Vijay Ayyar, head of business development at cryptocurrency exchange Luno, told CNBC.
Aside from the coronavirus-related issues, traders are also looking toward developments on the technical aspect of bitcoin. An event that has been dubbed the “halvening” is happening in May and it relates to bitcoin’s underlying technology — blockchain.
Miners with specialist computers compete to solve complex math problems to validate bitcoin transactions. Whoever wins that race gets rewarded in bitcoin.
Currently, miners are rewarded 12.5 bitcoin per block mined. The rewards are halved every few years and that rule is written into bitcoin’s underlying code. By May 2020, the reward per miner will be cut in half again, to 6.25 new bitcoin, essentially reducing the supply of the cryptocurrency coming onto the market.
Previous halving events have preceded big price increases in bitcoin.
“The bitcoin halvening as well as the recent surge fueled by pandemic fears and public market jitters is yet another reminder that bitcoin is much less risky and offers potentially outsized returns,” Jehan Chu, co-founder of blockchain-focused venture firm Kenetic Capital, told CNBC.
He added that bitcoin “is poised for a breakout run to $15,000 by mid-2020.”