Bitcoin has been seeing some serious growth in terms of its price over the past few days. At the beginning of April this year, the asset was floating in the lower $4,000s while as of now, at the time of writing, it falls below $11,000 mark standing at around $10,950 while showing a -5.16% change in the past 24 hours.
It has crossed significant landmark price levels in the past few days and the big question now is, what are the main factors behind this price pump? The answer might just not be linked to the bitcoin ecosystem at all; it possibly has something to do with Facebook‘s Libra announcement, along with some other factors.
Talking about the factors behind bitcoin’s recent price uptick, Sergio Stephano, managing director at Blockdigital, who was also a speaker at the Malta Blockchain Summit as well as the Monaco International Blockchain Summit, said:
“I believe the price uptick is due to a few factors.
- Facebook’s Libra – This marks official moment that Crypto has gone mainstream. Facebook’s Libra promises to bring 3 billion+ people into the blockchain world.
- Tether – There certainly is manipulation happening in Tether. A cursory look through court proceedings Tether has been involved in show that they have admitted that it is not fully backed by the USD at a 1:1 ratio as previously claim. In my opinion while they state it’s backed by a 70-80%+ to 1 dollar my estimates show this to be more around the 10-20% range if not lower.
- Adoption + Acceptability: The general public is becoming more and more aware about Bitcoin. Use cases are starting to take hold and many of the world’s largest technology companies are starting to implement on top of the Bitcoin blockchain.”
Three major reasons are outlined by Sergio here. First one is Facebook’s recent announcement of its very own cryptocurrency, Libra. The crypto world has not been recognized as the most trustworthy space owing to the usage of cryptos in illegal activities and the scams associated with them.
With this lack of credibility, the importance of the underlying technology blockchain also gets undermined. But with Facebook adopting blockchain and launching a cryptocurrency, a more positive image of the crypto world gets established globally.
Facebook has a user base of billions and by launching a cryptocurrency, it is exposing a wide population across the globe with the nascent and still-developing world of cryptos. This also means that people will get exposed to bitcoin and other blockchain-based relatives of the Libra currency. Bitcoin’s price is also largely based on speculation and a positive hype around the asset often results in a price spike which is exactly what the market might have just observed.
Stablecoins have been seen as the cure to the problem of volatility in the crypto space as they are backed by some commodity or fiat. Although they are not pure cryptocurrencies, they still open the gates of the crypto world to new users. But the controversies around one of the renowned stablecoin, Tether, might just have pushed people to adopt the “good-old and pure” cryptocurrency that is bitcoin instead of others.
While stablecoins do establish a more positive image of cryptos by acting as a bridge with the fiat world, controversies certainly do not help people in trusting this bridge.
Thirdly, the adoption of the bitcoin world globally is seeing steady growth. More and more exposure is being given to the asset as big companies are stepping into the blockchain space. Blockchain technology is being experimented upon by many big names such as BMW, Walmart, Microsoft, Pepsi etc., and it is only developing a more positive aura around this tech, the same tech that lies underneath bitcoin.
The prospects of trustlessness, openness and transparency that the blockchain technology offers are now being put in the limelight by various use-cases. All in all, the adoption is increasing and as the demand for an asset increases, so does its price.
Things are looking set for a prolonged bull run; it will be interesting to see where the bitcoin goes on from here in terms of its price. Nothing can be said for sure for bitcoin as it is up one minute, down the next.