7 Possible Reasons For Bitcoin’s Current Price Rally

Today, for the first time in the last three years, Bitcoin’s price has reached $18k, in less than a day after surging above $17k.

Bitcoin’s all-time high was $20k, which was in 2017, and the current price is very close to that mark.

Although it has successfully surpassed the 2017 high in terms of market cap, during its all-time high in 2017, the market cap of Bitcoin was $328 billion, and currently, it sits around $334 billion.

It has been quite a journey for Bitcoin since its lowest drop in March 2020, where it dropped to $4k in value. And since then, it has pulled through, fighting its way above the $10k price point to reach where it is now. Check the BTC to INR rate to see how much Bitcoin is trading at today.

Bitcoin’s bull run over the past few weeks suggests it is on its way to set new highs. But what could be the reasons for this bull run?

Let me jot down some drivers of the Bitcoin price rally this time:

1. Growing Institutional Participation

The 38,250 #BTC purchased by MicroStrategy for $425 million are now worth $688 million.

@michael_saylor deserves the title of best CEO ever for his bold and intelligent choice to opt for #Bitcoin pic.twitter.com/5JFqiwseGQ

— Sylvain Saurel (@ssaurel) November 18, 2020

The participation of institutional investors in Bitcoin started picking up when MicroStrategy invested $425million in Bitcoin earlier this year, and their books now stand at 46% profits.

The CEO of MicroStrategy has also been praising Bitcoin publicly since they announced their investment intentions in Bitcoin. After MicroStrategy’s investment, Square (another listed company) also invested $50 million in Bitcoin and made significant profits of 53%.

Bitcoin also garnered some praise from Amrita Ahuja, CFO at Square, who said,

“We believe that Bitcoin has the potential to be a more ubiquitous currency in the future,” adding that, “For a company that is building products based on a more inclusive future, this investment is a step on that journey.”

MicroStrategy and Square’s Bitcoin investments are now worth $620 million and $76 million, respectively.

These sky-high profits and confidence of large institutions in Bitcoin have paved the way for many such investments and praises for Bitcoin.

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2. Growing Public Support

The daily global #Bitcoin demand is higher than the daily release of #BTC; this was not the case in 2012 or 2016 after the halving.

When the daily supply mined can't fulfill the daily demand; we know what happens next.

This is new territory #Crypto kids!

— Bitcoin💞Ethereum🌐XRP💗SHIB•🇬🇧🇫🇷 (@Bitcoin_Jedi) November 2, 2020

Bitcoin also amassed much praise and consideration from some big names in the Finance and Investing sector because of its performance lately. In fact, it changed the views of many, turning them from non-believers to believers.

One such example is JP Morgan’s CEO, Jamie Dimon, who labelled Bitcoin a “fraud” in 2017.

But, in October 2020, the investment bank said Bitcoin is competing with gold and that “the potential long-term upside for Bitcoin is considerable.”

Another example of it is Stanley Druckenmiller, an investor who was earlier scornful of Bitcoin, said the famed cryptocurrency might just be better than gold. “I own many, many more times gold than I own Bitcoin, but frankly if the gold bet works, the Bitcoin bet will probably work better,” Druckenmiller said this month (November 2020).

These were just some renowned names praising Bitcoin’s merits; many investors had a 360-degree turnaround on their stand on Bitcoin.

3. Investors Expanding Their Bitcoin holdings 

The reason why Bitcoin is so attractive to institutions and high-net-worth individuals is that it uniquely serves as both a hedge and an asset with exponential growth potential.

It is an effective portfolio diversifier and store of value.

— Joseph Young (@iamjosephyoung) November 10, 2020

After listening to institutional investors’ praises and participation, individual funds houses didn’t want to be left out.

As a result, Grayscale, an asset management company, grabbed over 40,000 Bitcoins, worth over $600 million for its clients. And CashApp also bought a huge chunk of Bitcoins, bringing both companies to 85,000 Bitcoins.

To give you perspective, 1,63,800 Bitcoins were mined during the first quarter of 2020, and the two companies alone jointly secured about half of the total Bitcoin mined in that quarter.

4. Continually Shrinking Supply

Pre-halving, @CashApp was buying 20% of all newly-issued BTC. Now it’s ~40%

You can go round and round with pundits on valuing #Bitcoin. One thing that is certain – when net supply goes way down – and demand is constant or growing – the price goes up.https://t.co/oDM9D1FbjZ pic.twitter.com/8e3kHRju4W

— Dan Morehead (@dan_pantera) November 2, 2020

Bitcoin halving happens every four years, and after every halving, block mining rewards get cut into half, which reduces the supply of coins by 50%.

The third halving of Bitcoin happened in May 2020, reducing the supply of Bitcoins in circulation, and therefore it is most likely contributing now to the price surge.

Bitcoin halving uses the fundamentals from basic demand and supply equations. When demand for a particular item remains the same while the supply for it shrinks, the item’s price increases.

5. Paypal Joining the Bandwagon

PayPal validating #bitcoin will be the shot that’s heard round the world.

— Charlie Shrem (@CharlieShrem) November 12, 2020

The buzz was all around when PayPal announced its plan to launch cryptocurrency buying and selling feature on its platform.

The launch included enabling the buy and sell of four currencies, which include Bitcoin, Bitcoin Cash; Ethereum; and Litecoin.

They are also planning to expand the same to Venmo.

Initially, Paypal suspected Bitcoin adoption, but large corporations and influential investors’ convincing attitudes towards Bitcoin swayed their participation.

But it won’t be an exaggeration to say that Paypal’s participation has made Bitcoin more mainstream than ever.

6. Breakout of Charts 

Many analysts had bid on $12.5k to beat the bull run as Bitcoin declined soon after, nearing $12.5k in August 2020.

But later in the third week of October, it broke past the resistance of $12.5k and started its bull run.

After breaking through the charts’ resistance, it surely raised the hopes of many and finally has touched the peak of $18k and is so close to hitting its all-time high of 2017, which was $20,000 per BTC.

7. Fed Chairman’s View on the Digital Dollar 

During a virtual event hosted by the International Monetary Fund in October, Federal Reserve’s Chairman Jerome Powell spoke about the benefits of making a digital version of the U.S dollar.

Just weeks before the event, the Fed had released a blueprint for the same. He also spoke about the challenges that the digital dollar would bring with it and feels that there is a great deal of work that needs to be done before they go ahead with it.

The People’s Bank of China is leading the digital currency sphere as they had successfully launched their digital currency trial last week.

Many countries are thinking on the same lines as China and the U.S, including India; this has added that extra boost of confidence in the people about Bitcoin’s status- the world’s first fully functional cryptocurrency.

What Are You Waiting For?

There is surely no doubt about Bitcoin’s potential and its adoption with all the reasons I have listed.

But if you are still someone who has not yet dived into cryptocurrencies. I want to tell you that the pace at which wealthy individual investors and institutions are adopting Bitcoin, it will soon become even more scarce.

So do I still need to tell you what to do? Or where to buy Bitcoin at the best rate?

Happy Investing !!