Bitcoin price surges to three-month high exceeding 9k
Major forces behind BTC rate movements
It’s the first month of 2020 and the rate of bitcoin has already hit a peak. From bottom to top, BTC has grown about 28% in the space of 18 days and the price of the largest cryptocurrency has been continuously increasing in the last few days. For the second time in a week, it has climbed over $9,000.
What are the factors affecting the price of bitcoin?
Causal effects of media coverage
One of the biggest influences in the change in BTC price rate can undoubtedly be media coverage. Opinions and behaviors of investors go hand in hand with this as well. The more media coverage something gets, the more people are aware of it and may invest in it. Positive media coverage typically causes price to increase, while negative coverage results in drops in prices. More stores and services are accepting bitcoin and making it public causing more people to view it as legitimate.
The political economy of bitcoin
Political actions and events always leave a mark on the price of currencies and with cryptocurrencies, it’s no different. However, the change in value is often opposite that of the relevant government-sponsored currency. Uncertainty in a country’s economy causes people to put their trust in cryptocurrencies such as Bitcoin instead because it isn’t tied to any government. A great example showing this is the 2015 economic crisis in Greece which led to a surge in interest in Bitcoin from Greek traders. This January bitcoin has also moved sharply higher after Iran retaliated for the U.S. killing of Iranian general Qassem Soleimani.
Perceived impacts of government regulations
Governments have been struggling to determine how, and whether, to regulate bitcoin or not since it’s such a novel concept. Bitcoin isn’t tied to any government, yet regulations can directly impact how the system works. Regulatory decisions involving digital currency have led to both surges and drops in their prices. When China, the world’s biggest crypto market, cracked down on Bitcoin and shut down several coin exchanges, the price of Bitcoin fell dramatically. As soon as the Japanese government officially recognized Bitcoin as legal tender, its price shot up over the next several months.
Interpreting supply and demand graphs
Like other currencies, bitcoin is subject to the impacts of supply and demand. A supply greater than demand will lower the price. Conversely, a demand greater than supply will increase it. Supply and demand is the major value proposition that gives Bitcoin its value. The supply of Bitcoin is similar to that of gold. Just as there is a predetermined amount of gold in the earth, the Bitcoin protocol has a predetermined number of Bitcoins within it. People need to mine gold to bring it into the marketplace. The more people want Bitcoin, the more the price of the coin increases. This ultimately takes us to a variable that might be influencing the drastic rate movement occurring during these past two days, bitcoin mining.
Although these factors influence bitcoin in the long run, there are various other primary factors that might be currently influencing the peak of bitcoin reached, especially the one of today.
Bitcoin halving looming
The ever looming halving event is coming up in May of this year. The event will see the reward miners receive for adding new blocks to the network slashed in half, hence reducing the supply of freshly minted bitcoins. Historically, this has caused massive increases in terms of price, both times the halving took place in the past.
Crypto Market Cap
The past few days have seen gains across the entire cryptocurrency market. With this much fresh money flowing into the market, it is only to be expected that Bitcoin price would also keep benefiting from that. The total cryptocurrency market cap grew by over $17 billion in just 48 hours. The market cap was last at this level in November, during the seven-month bear market. Regaining this level would be a strong indicator that this trend is once again underway.
Bitcoin isn’t the only crypto that experienced a price surge this week. Other digital curriencies also recorded acceleration. Bloomberg Galaxy Crypto Index recorded a 1.7% rise in the performance of the world’s largest cryptos, which is well above a two-month high. Bitcoin nearly doubled to $7,193.60 from $3,732.22 last year. The days ahead might be critical for Bitcoin as a further wave of upside momentum may very well follow, boosting the market price ever more.
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