Over the past month, bitcoin has taken the entire financial world by storm as it has gained strength in its price not seen since 2017. Now, at the time of writing, bitcoin is standing at around $8,138, showing more than 4% increase in the past 24 hours.
The $8k mark has been crossed for the first time since July last year which shows how inactive the asset has been over the months until April came along. The spike above $8,000 has now been the second 1,000-dollar jump that bitcoin has made over the past week. This shows that the FOMO (fear of missing out) gathered around the asset has now gotten quite big, attracting more people into the bitcoin world. But as the bull-run has set in, what are the major factors that are pushing its price up now?
Bitcoin is a blockchain-based decentralized digital currency that has no physical backing like gold or oil. Its price is purely based on speculation, that is to say that people buy it with the hopes of its price rising up thus maintaining its value in the market at the same time. Speculation is the major reason pushing bitcoin’s price up. As news about positive developments in the crypto and blockchain world are circulated, both in technological and legislative fronts, more people start buying the asset with a certain level of trust. This decreases the supply in the market and pushes the price up based on the simple supply-and-demand mechanism.
Secondly, FOMO (the fear of missing out) is also something that carries extreme significance in spiking the price of bitcoin. Back in 2017, bitcoin rose from a few thousand dollars to almost $20,000 within a matter of months and the people who had made timely investments in the digital asset earned huge rewards. As bitcoin’s price started rising up initially, more people jumped on the bandwagoning because of FOMO. No one wants to miss out on a timely and profitable investment after all. This time around, as bitcoin has risen by around $3,000 more than its price at the start of April, people are again jumping on the bandwagon with the hopes of riding another 2017-like bull tide.
Another probable factor that is adding fuel to this fire of crypto rally is the “halving” event that is supposed to arrive in May 2020 for the bitcoin miners. Currently, after each block is mined in the Bitcoin blockchain, a reward of 12.5 newly-minted BTCs is given to the miner that mines the block. This is how new bitcoins get added to the network maintaining the supply of new coins in the network. But the reward is algorithmically decided to be halved every four years for the miners. As the amount of newly-minted coins will drop from May 2020 onwards, investors are trying to gain or accumulate as much bitcoins as possible at still reasonable prices before the supply drops.
One of the biggest factors that are being associated with the current bitcoin price spike is the institutional interest. The news of big names, such as Facebook, Amazon, JP Morgan, eBay, stepping into the blockchain space has resulted in a positive sentiment around bitcoin. One of the giants in the tech world, Microsoft, is even launching a decentralized identity tool on Bitcoin blockchain. It was also recently announced by Bakkt, a regulated platform for digital assets aimed at serving institutions, merchants and consumers, that it will be testing its much-awaited bitcoin futures around July this year. It was stated by Bakkt Chief Executive Officer of Bakkt Kelly Loeffler in a blog post recently:
Today, we’re pleased to update you on the launch of bitcoin futures contracts developed by Bakkt in collaboration with ICE Futures U.S. and ICE Clear U.S. We’ve worked closely with the CFTC to develop contracts that both meet our customers’ needs for trading, transparency, and market certainty, and are also compliant with Federal regulations.
Bakkt will open up a new ecosystem for the institutional investors providing the much-needed regulation that has been largely missing up until now in the crypto world. Institutional money has largely been sitting on the sidelines of the crypto space due to the prevalence of illegal activities and lack of regulation.
With platforms like Bakkt, a positive sentiment will be established among the institutions and the general public which can take the price of bitcoins to its new highs. Once institutional money flows into this space raising its market cap, it is very likely bitcoin will get more attention than ever before. From the news that is floating around, it is safe to assume that bitcoin is surely working its way to get there as soon as possible and is also benefiting from the supportive institutional sentiment right now in terms of its price.
Will we see the current bull-run extend like the one in 2017 or not? This is a question that needs an answer but only time will tell how things unfold for the biggest cryptocurrency of the world, bitcoin, as it stands around the $8k mark for now.