The Bitcoin price can be notoriously volatile. Since its creation in 2009, the digital asset has gone through some truly astounding price increases and stomach-churning drops that often defy explanation – with some analysts shrugging their shoulders and repeating 2013 meme describing it as “magic internet money.”
However, the bitcoin price has been unusually quiet in recent months. The cryptocurrency had been hovering in a tight band between $9,000 and $10,000 for nearly all of the last three months, until a sudden breakout over the weekend sent the price soaring past $11,000.
On Monday, the price of Bitcoin past $11,000, up from around $9,100 a week ago, and it went as hight as $10,400 on Tuesday and now, at the time of writing it’s at $10,940.
This is notable given how Bitcoin has failed to stay above $10,000 on the few occasions when it’s broken that mark, and how it hasn’t crossed $10,500 in nearly a year.
Why Is The Bitcoin Price So High Right Now in 2020?
There doesn’t appear to be a single reason, but according to experts, there are several factors that have conspired to push the Bitcoin price to new 2020 highs, let’s have a look at some of them.
Eric Turner of Messari Research noted that crypto traders have been reaping large gains from obscure digital currencies on so-called “DeFi” (decentralized finance) platforms.
Turner speculates that many of these traders have been plowing their gains into the two most mainstream crypto assets, Bitcoin and Ethereum, and driving up the price.
US Banks Can Now Hold Bitcoin
Bitcoin prices may also be getting a tailwind thanks to last week’s letter from the Office of the Controller of the Currency, which stated banks can hold Bitcoin on behalf of their customers.
Many in the crypto industry have treated this as a bullish signal, and predicted it could lead to new investment in cryptocurrencies from large funds and Ultra-High Net Worth individuals.
Bitcoin As A Safe-Haven Asset
The rally could be related to the uncertainty of the stock market, leaving people looking for a safe-haven alternative to cash and stocks.
Gold prices have also been on the rise, and some suggest that perhaps bitcoin is the gold of the tech age, ‘digital gold’.
There is a general sense of fear and uncertainty around the globe. Such sentiments can lead investors to seek out assets like gold, which has been surging due to the pandemic and geopolitical uncertainty like China-US tensions.
Bitcoin Price Fundamentals
Bitcoin price may also be increasing based on fundamentals.
Rob Sluymer, a technical strategist at Fundstrat Global Advisors said:
“We remain positive on the overall precise structure for Bitcoin and do expect it push through $10,000-$10,500 as part of its longer term bullish technical profile,”
Sluymer also said that Bitcoin needs to break through a “resistance band” of $10,500. Once it does, he suggested the currency will encounter the next such “resistant band” at $13,800.
Bitcoin Ruled As Money in US Court
Bitcoin is a form of “money” covered under the Washington, D.C., Money Transmitters Act, a federal court said Friday.
In the case of United States v. Harmon, Chief Judge Beryl A. Howell wrote that money is:
“commonly means a medium of exchange, method of payment, or store of value.”
“Bitcoin is these things,” Judge Howell added.
Defining bitcoin as money was integral to the court’s decision to not dismiss criminal charges against Larry Harmon, the operator of an unlicensed bitcoin trading platform, for laundering money under federal law.
The court’s comments mean that bitcoin “is treated as money in the context of money transmission licensing in D.C., nothing more,” said Neeraj Agrawal, director of communications at Coin Center, a cryptocurrency public policy think tank.
None of this provides a definitive explanation for Bitcoin’s latest uptick, however, there is the underlyong bullish case for Bitcoin and bitcoin price to consider.
Bitcoin is transitioning from the collectible stage of monetization to becoming a store of value.
As a non-sovereign monetary good, it is possible that at some stage in the future Bitcoin will become a global money much like gold during the classical gold standard of the 19th century.
The adoption of Bitcoin as global money is precisely the bullish case for Bitcoin, as Satoshi Nakamoto wrote in 2010 in an email exchange with Mike Hearn:
“If you imagine it being used for some fraction of world commerce, then there’s only going to be 21 million coins for the whole world, so it would be worth much more per unit.”
In closing here is a quote from the late, great Hall Finney to consider:
“Imagine that Bitcoin is successful and becomes the dominant payment system in use throughout the world. Then the total value of the currency should be equal to the total value of all the wealth in the world. Current estimates of total worldwide household wealth that I have found range from $100 trillion to $300 trillion. With 20 million coins, that gives each coin a value of about $10 million.”