Rise of Bitcoin Price: What Drives It?
Last week was a big surprise for many Bitcoin supporters. For most of the week, Bitcoin prices were going up and down in a predictable pattern. But this all changed when Friday hit as a positive movement emerged from the constant Bitcoin price fluctuations. Early on May 27, Bitcoin prices started to go up and, aside from a dip or two, they have not stopped rising.
For those who have invested and believed in Bitcoin, this is an exciting time. People are taking notice and they remember Bitcoin’s past performance. For the next few weeks, many will be watching the price charts to see if this current trend will continue.
The historical data
The highest that Bitcoin has ever been priced is around $1,200. That was back in early 2014 when it peaked but started dropping along with the infamous Mt. Gox collapse. There have been later surges in prices, but they have not been able to reach that pinnacle again. Bitcoin’s price suffered a downturn, though. When July 2014 rolled around the price was dropping fast. The cryptocurrency’s price reached as low as $200.
When Bitcoin prices reached that level, they started to recover. For the past two years, the prices have been on an upward trend. However, the price increase has been a slow crawl. This past Friday’s surge was surprising in its speed and a lot of people are both worried and excited in equal measures.
Potential reasons and current projections
There are a couple of potential reasons that could have triggered this Bitcoin price spike. The most obvious one is the depreciation of the Chinese yuan. Chinese investors are probably the biggest market for Bitcoin, mostly because they want to evade China’s capital controls and put their money elsewhere so it would not lose its value. When the yuan started weakening, this triggered a run for bitcoins by investors hoping to protect their wealth. This increased the value of Bitcoin quickly.
Another potential reason for the rise in prices is the approaching halving. At the end of July, the incoming Bitcoin mining reward will be reduced by 50 percent. With less bitcoins going around, people will want to get their hands on as many as they could.
Right now, the projections for the current price movement are sharply divided. A lot of Bitcoin supporters have predicted that 2016 would be the year that the cryptocurrency would “go big time.” This sudden surge in price could be a sign that Bitcoin really is getting into high gear.
Another camp thinks that this is all a bubble. Some experts think that the surge in prices will inevitably stop and a quick fall is to follow. Many point to what happened in 2014 after Bitcoin reached its highest price. A quick drop in prices could be devastating.
Right now, some experts maintain that the continued rise of Bitcoin price is fueled by traders who expect a big payday in the future as they sell their cheaply acquired bitcoins for higher prices. They believe that deflationary pressure will inevitably stop the upward trend, though, and a drop is coming.
The future is still hazy and no one can tell which scenario is more likely to happen. Bitcoin watchers will be waiting expectantly in the coming months for what will happen.