The Bitcoin price has now passed the $19,000 level for the first time since the peak of its 2017 ‘bubble’. Having been on the rise since September, with price gains accelerating sharply in recent days, the big question is what happens now?
Over the turbulent history of the cryptocurrency, there has been a pattern of sharp gains and new record highs being followed by a period of 2-3 years of regrouping. Each time the next time Bitcoin has surged the new high has significantly outdone the previous level. Were that to happen again this time around, the Bitcoin price would go into orbit over the months ahead.
At this stage, actually at any stage in the context of the volatile digital asset, any guess at where it goes after it breaks the previous high of $19,666 would be pure speculation. But we’ll see over the next several days if any serious price resistance will now be met at the level of the previous high point.
Yesterday’s gains of around 6% took Bitcoin to $19,429.02 at it’s peak. The original cryptocurrency is now up 165% for the year.
There are a few drivers that have catalysed the recent price gains for Bitcoin. One is some signs of broader acceptance in the real-world economy. For example, Paypal now facilitates bitcoin payments. However, uptake is still on a very low level.
Another is that many people are concerned about high volumes of money printing by governments over 2020 as they financed Covid-19 pandemic support packages for their economies. High levels of quantitative easing have historically been followed by high levels of inflation. Traditionally, gold has been the asset investors have turned to, to protect themselves against inflation. In the digital age Bitcoin, which has a fixed number of units that can exist that will never change, has become an alternative.
The third theory is that, like some believe to have been the case in 2017, a small number of owners of large volumes of the cryptocurrency, so-called ‘whales’, are manipulating the market. The opaque nature and relative anonymity afforded by the Bitcoin trading market makes this hard to rule out.
Mike Novogratz, founder and chief executive of Bitcoin investor Galaxy Digital, sees significant differences between current Bitcoin price rises and those back in 2017. He argues that three years ago the surge in value was a global phenomenon driven by small retail investors. While the current rally, he says is being driven by institutions gradually moving into the space. He thinks this means the levels of volatility will be far lower than they were three years ago. That it’s maturing.
Last week Irish broker Davy forecast one bitcoin will be worth between $200,000 and $600,000 by 2040. A leaked report written by Citigroup forecast bitcoin going as high as $318,000 by the end of 2021.
Others are sceptical. Quoted in The Times newspaper, Kevin Muir, a Toronto-based currency trader commented:
“You can’t model a mania. Is it plausible? For sure. It’s a mania. But does anyone have a clue? Not a chance.”
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