Countless people believe at some point or another the Bitcoin price bubble is going to pop. Yet, at the moment that doesn’t seem likely. We’re only five months into 2017 and the digital currency, that is helping to transform so many lives, has already produced three all-time highs. What is the reason behind Bitcoin’s continuing price rise and is it on its way to becoming a mainstream currency with real world value?
In 2008, Satoshi Nakamoto may have envisioned that his creation would produce great things, but if he decided to re-enter the digital currency space and could comment today, what would he say about the way Bitcoin was heading?
Let’s take a look at what 2017 has seen so far for the digital currency and what the likely contributing factors are, which are helping to boost the currency.
At the beginning of the year, the price of Bitcoin increased by 20 percent, surpassing the value of gold when it reached $1,197. Naturally, the news of this would have wiped any January blues away as it fuelled speculators hope that this was the beginning of something great for the digital currency. And they would be right.
Fast-forward to March and Bitcoin’s price reached its first new all-time high of $1,350, sailing past its previous high in 2013 of $1,242. This was down to the fact that the Securities and Exchange Commission (SEC) was about to decide whether to approve the first exchange traded-fund (ETF). However, while the SEC rejected it and the price of the digital currency tumbled to below $1,000 following the news, it has steadily regained, even surpassing March’s price.
May, though, has already produced great things for the currency. We’re only into day three of the month, but, so far, the price of Bitcoin has pushed out two further all-time highs as it continues to scale new heights. On May 1, the Bitstamp Price Index (BPI) showed that the currency was trading around $1,425 while on Coinbase, prices peaked beyond $1,460 on Monday. Since the beginning of 2017, the cryptocurrencies price has increased by 42 percent.
The second day of May, however, continued to see the Bitcoin’s price bulldoze its way to further unchartered heights by claiming a new all-time high, and its third one so far this year, nearing the $1,500 mark at $1,484.
Just a month ago, the total market cap of all digital currencies reached $26 billion after dipping and rising slightly above $20 billion. Bitcoin was the main driving force of this increase, which has seen its market value increase from under $6 billion last May to now stand at $23 billion. As a result, the total market cap for all digital currencies is pushing its way to $38 billion.
With the current price of Bitcoin trading around $1,450, according to CoinMarketCap, who’s to say where the price will be tomorrow.
Bitcoin Gains Real World Value
When Bitcoin first came on the scene it was portrayed with negativity due to the fact that hackers were targeting companies for their bitcoins and ransom demands were ordering payments in the digital currency.
It’s come a long way since then and is helping to transform millions of people’s lives. Used as an alternative for remittance payments, those sending money to families can use the digital currency without getting charged high fees, which is typical with money transfer services such as World Remit or Western Union.
Not only that, but it’s helping to bridge the gap among the unbanked and underbanked populations, giving them access to financial services that many find themselves excluded from with traditional banks.
Its global demand is continuing to rise. Last year, the Indian government announced the banning of two of its largest banknotes, the Rs 500 and the Rs 1,000, in an attempt to crackdown on so-called black money. By doing so, the country’s demonetization saw an increase in alternative assets, one of which was Bitcoin.
So much so, that Google trends indicated that searches for the digital currency had increased by 20-30 percent. As India continues to push the digital currency and digital banking drive, research indicates that it could spur on the growth of smartphone sales as more people move away from paper cash.
China too is experiencing an increase in Bitcoin. At the end of 2016, China limited the importation of gold as it sought to stop the devaluation of the yuan. As a consequence, the digital currency became a highly attractive asset for investors.
And countries such as Venezuela, which has the highest inflation rates and is undergoing an economic crisis, are turning their attention to Bitcoin as an alternative asset for purchasing basic items many of us take for granted, such as medicine.
It begs the question: if Bitcoin wasn’t here to help the millions of disenfranchised people in the world, where would they be now? Would their government help them out? Who would bridge the gap and reach out to the unbanked population to give them access to financial services? For a currency that hasn’t been around that long, Bitcoin has managed to mature and help change people’s lives for the better.
Why Is Bitcoin’s Price Continuing to Rise?
There are several factors as to why this may be.
Firstly, it could be down to the fact that the SEC has recently decided to review its previous rejection decision of the Winklevoss Bitcoin ETF after approving the Bats Exchange petition, which is where it would have traded had it been approved.
Another possibility could be that Japan and Russia have decided to legitimize the digital currency, which may have played a role. Russia, who has, in the past, been strongly against Bitcoin, is seeking to regulate Bitcoin and other digital currencies. Last month, Russian Deputy Finance Minister Alexey Moiseev said in an interview that the authorities are hoping to recognize cryptocurrencies in 2018 to tackle money laundering.
However, a third possibility could be because there has been a rising demand of institution investors toward Bitcoin, according to Brian Kelly, CNBC Analyst and founder of Brian Kelly Capital. Kelly states that the digital currency is now being viewed as a long-term investment, store of value and settlement network instead of ‘hot money’ or a short-term investment.
Alex Sunnarborg, a CoinDesk research analyst, also indicated that the rise in global Bitcoin trading volume was mainly seen from Japan and its bitFlyer bitcoin exchange.
One financial conglomerate, SBI Group, which is based in Tokyo, has already established an SBI Virtual Currencies, so that investors can trade their Bitcoin for the Japanese yen. According to an SBI representative, they said:
“We didn’t even have minimum guidelines [back in 2014, when the bitcoin exchange Mt. Gox collapsed], so users will now feel more secure.”
Tokyo-based GMO Internet is also establishing its own company where it aims to increase the number of cryptocurrencies it trades based on the demand it meets. Whereas fellow Tokyo-based Kabu.com Securities and foreign exchange trader Money Partners Group have plans to enter the space too.
With the digital currency’s price continuing to rise, more people will be keen to invest in it. This will only help the currency further, pushing its price even higher those helping it to become a mainstream currency.
Featured image from Flickr via tiendientu vietnam.