First Mover: Why Is Bitcoin’s Price Rising? Here Are a Few Possible Answers

What is behind this recent rise in Bitcoin price? That is a question that many people want a definitive answer to. So far it has been difficult to find a unified theory.
What we do know is that since mid-October the price of Bitcoin has increased from $ 11,000 to $ 19,000. And while prices are a few hundred dollars off their all-time high, Bitcoin's market cap recently set a record by breaking over $ 345 billion. Since the 2017 mega rally, more Bitcoin has been mined and put into circulation.
For a large number of market watchers, the cause of the rally is clear: more buyers with deeper pockets. If so, this is a good sign of further profits. But there is also a plausible theory that unusual circumstances temporarily restricted the supply and called into question the stamina of the rally.
The case for demand: new money
Related Topics: OKEx Withdrawal Lock Is Not Behind Bitcoin's Rally: Analysts
There doesn't seem to be a day that goes by when a large financial institution warms up, if not directly, to Bitcoin. A CIO at BlackRock said on CNBC that it "could largely take the place of gold". An analyst at Citi said Bitcoin could hit $ 318,000 by the end of 2021. A report from JPMorgan claims that institutions are buying three times as much as they did in the previous quarter.
The world is in the middle of a pandemic that is causing economic turmoil on every continent, including Antarctica. Central banks are printing fiat currencies as fast as they can (strangely, Hewlett Packard's stock is up 3% since the start of the year). Governments are also active, throwing trillions of dollars, euros and anything else they can borrow to fend off an economic calamity that would lead to social unrest and street violence - or more of it.
Since emerging in the depths of the global financial crisis more than a decade ago, such potentially inflationary measures have been exactly the things Bitcoin proponents warned, and perhaps secretly hoped, of when they first started stocking up on digital assets.
Then there is the data. CoinDesk's Galen Moore describes in a recent article how this current rally differs from 2017 in four ways. More "whale" accounts are holding 1,000 or more Bitcoin than ever before, and unlike three years ago, their prices have continued to rise. Bitcoin and its closest rival, Ether, hit the most recent highs together, while in 2017 the record price of Ether was seen in the rearview mirror for months after Bitcoin rose. This time, regulated markets are part of the mix. The daily trading volume for CME futures has been north of $ 1 billion for several days over the past few months. And since early 2020, investors in East Asia have sold around 200,000 Bitcoin to satisfy the growing appetite of their North American counterparts.
Related: First Mover: Near record highs, Bitcoin can have a volatile week
These are all deeply bullish signals. However, there remains a nagging “why” question: why now?
After all, preliminary data on three vaccines against COVID-19 have shown an effectiveness rate of 90% or more. The physical threat looming over everyone's jobs and every aspect of their lives may soon be gone. And politically, too, the uncertainty in the United States about who will rule the federal government in a few months' time has gradually resolved.
The case for delivery: Bottled Bitcoin
Part of what makes the current lead-up narratives so attractive is that they focus on the demand side of the declaration. However, as we all know, supply is the other side of the equation. Is there enough bitcoin to quench the thirst of all those new buyers who have come into the market, fueled by economic worries and stimulated by analysts?
Months ago, supply was the big issue among those talking about crypto. Bitcoin has been cut in half, with the rewards for successfully mining a block in half. This would automatically lead to a price increase, according to the theory, because 900 fewer new Bitcoin would be added every day, but new buyers every day. This was early May; In the following months, the price of Bitcoin stayed at $ 9,000. Since halves are well known events programmed into the Bitcoin code from the start, the market apparently wasn't too surprised when it actually happened.
Going back to what else we know, one thing that should be added to this list is that in China, where the lion's share of bitcoin hashing power resides, a government action against some of the crypto exchanges that the miners use of the country, affects traders. The crackdown is not necessarily about stopping crypto, but rather about stamping out money laundering. It just so happens that crypto exchanges may be suspected in the mix. Executives on stock exchanges received the third degree.
At OKEx, a senior executive - literally the man who had the keys to OKEx's addresses - went to MIA and only recently reappeared after speaking with authorities in China for some time. In the meantime, the supposedly Malta-based exchange had to cease withdrawals because apparently only one person had such keys for one of the largest trading venues in the world and happened to be in China. It is to be hoped that OKEx has worked out a contingency plan in case someone is hit by a bus.
Oh, and the date it all started? October, 16th. That's a few days before the price broke out of the $ 10,000-12,000 trading range in which it had rallied since July.
The case against delivery: business as usual
Just because you can't withdraw Bitcoin from OKEx doesn't mean you can't trade it. Open positions on futures contracts are $ 1.22 billion, according to Skew. This is the largest open interest rate for an exchange. For example, the CME is $ 200 million smaller.
While Bitcoin cannot flow into or out of OKEx, its price is the same as that of its competitors.
"The price of BTC for OKEx is not much different from other exchanges," Ki Young Ju, CEO of data provider CryptoQuant, told CoinDesk's Muyao Shen. "... [P] people can trade their BTC on OKEx despite the withdrawal block."
And miners are finding other places to unload their newly minted bitcoin. Huobi, Binance and other exchanges appear to be on the decline, according to Chainalysis. Unfortunately, it was not easy for some miners to convert their crypto to fiat (in this case Chinese yuan) as money laundering was cracked down on.
stay tuned
The two explanations for Bitcoin's bull run discussed above - new demand and bottled supply - are not mutually exclusive. At least one of them will soon be put to the test: OKEx is expected to allow withdrawals through Friday this week.
"With all the institutional flow around crypto, I don't think that the status of a single exchange is enough to influence prices beyond typical daily volatility," George Clayton, managing partner of investment firm Cryptanalysis Capital, told CoinDesk's Daniel Cawrey.
That may well be the case. We'll probably know by the end of this week. If we do this, we can finally find out if this is a demand or a supply market. That is, if it was really about having more buyers, or if it was really about having fewer sellers.
In the meantime, be sure to check when OKEx will allow withdrawals again.
- Lawrence Lewitinn
Today's Markets
Bitcoin is trading new 35-month highs above $ 19,000 after defending psychological support of $ 18,000 during Asian trading hours. The crypto market leader just missed the record high of $ 19,783 by 4%.
As a result, most of the alternative cryptocurrencies that are still well below their respective lifetimes look relatively cheap. For example, ether, the second largest cryptocurrency by market value, is down at least 57% from its peak of $ 1,431 in January 2018, despite gaining over 50% in that month alone.
Should Bitcoin's uptrend slow, investors could convert money into cheap alternative cryptocurrencies. "While Bitcoin price increases are aggressive, market participants are selling their alternative cryptocurrencies for Bitcoin to take advantage of the upward trend. Once bitcoin slows down, the capital flows back into alternative cryptocurrencies and valuation parity is found, ”said Nicholas Pelecanos, trading director at NEM Ventures.
In traditional markets, US stock futures flash green, while gold and the US. Dollars are care losses. Risk sentiment remains firm amid coronavirus vaccine optimism and easing political uncertainty in Washington. DC President Trump said his advisors would work with President-elect Joe Biden's transition to the White House to alleviate concerns over a protracted period of uncertainty.
- Omkar Godbole
Bitcoin clock
Bitcoin appears to be repeating moves seen after mining premiums halved in 2016.
The leading cryptocurrency by market value has risen by $ 9,000 in the past seven weeks and is likely to challenge the all-time high of $ 19,783 reached in December 2017.
In particular, the cryptocurrency closes at record highs 6.5 months after the third mining reward halving, which happened on May 11th this year. Reward Halving refers to a programmed 50% reduction in block rewards that are executed every four years to keep inflation under control.
The latest move towards record highs is similar to four years ago.
Bitcoin saw its second halving on July 9, 2016 when prices traded near $ 650. By the end of February 2017, seven months after the halving, the cryptocurrency had set a new high above the November 2013 high of $ 1,163.
The rally didn't stop there and, as mentioned earlier, the cryptocurrency hit a record price of $ 19,783. If history is a guide, Bitcoin could see a significant rally in 2021.
Most analysts believe that Bitcoin will explore uncharted territory above $ 20,000 in the next 12 months, due to increasing institutional involvement and the growing appeal of Bitcoin as an inflation hedge.
According to Su Zhu, CEO of Three Arrows Capital, $ 36,000 is the level to look out for when the cryptocurrency breaks above $ 20,000.
"This [$ 36,000] is the most open bitcoin strike strike in the Deribit exchange, the dominant leader in bitcoin and ether-settled options trading," Zhu tweeted.
- Omkar Godbole
What is hot?
The Ethereum 2.0 deposit agreement secures enough funds for the start (CoinDesk)
Schulman, CEO of PayPal, Says He's Optimistic About Bitcoin As Currency (CoinDesk)
XRP price rises to 2-year high as Airdrop Frenzy (CoinDesk) grows
Australian investment group with billions in AUM starts investing in Bitcoin futures (CoinDesk)
IRS warns crypto investors again about underreported earnings (CoinDesk)
The latest on economics and traditional finance
Biden to appoint Yellen as Treasury Department to save the US from the sharp economic downturn (Reuters) President-elect Joe Biden is expected to appoint former Federal Reserve Chair Janet Yellen as Secretary of the Treasury, a 231-year gender barrier break through and employ an experienced economist and labor market expert to lead the country out of the steepest downturn since the Great Depression.
Gold falls to four-month low on vaccine news, Biden Transition (Bloomberg) gold fell to its lowest level in four months amid optimism about COVID-19 vaccine development and the triggering of a formal transition process to President-elect Joe Biden .
Bitcoin trades near record breaking again, driven by the cryptocurrency of the new buyer group (WSJ), attracting billionaires Paul Tudor Jones and Stanley Druckermiller as well as momentum investors.
Dow futures rise 200 points as Trump administration begins transition process (CNBC). Stock futures rose in night trading Monday after a strong session on Wall Street boosted by positive vaccine news.
Wealthy Renters Escape America's Cities (The Economist) The prices of posh properties are falling, but cheaper ones are still in demand.
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First mover: why is Bitcoin's price rising? Here are some possible answers
First mover: why is Bitcoin's price rising? Here are some possible answers
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