If you were perusing Crypto Twitter in December of last year, you likely remember the fear that was circulating the industry; after Bitcoin had formed a steep downtrend to drop from $14,000 to $6,400 in a few months’ time, investors across the board were certain that the cryptocurrency was poised to fall further and further.
But, at the turn of the year, the price of BTC finally started to burst higher. In fact, since hitting $6,400 in the middle of December, Bitcoin has rallied by 45% to $9,300, where the asset trades at right now. And more broadly, the market capitalization of all cryptocurrencies surged from $185 billion to $250 billion in the month of January alone.
Although many have embraced this move with open arms, few know exactly why this took place.
Mainstream media have sprung to answer this question, getting quotes from analysts about what pushed Bitcoin and other digital assets so dramatically higher in the past 45 days.
What Sent Bitcoin Rocketing Higher?
Shaun Djie, CEO of digital token company Digix, attributed the recent rally to “ongoing economic uncertainties” in a comment to CNN Business. The industry executive specifically looked to the ongoing fallout of Brexit, the trade tensions between Japan and South Korea, and the potential risks in the U.S.-China conflict.
The idea here being Bitcoin is rapidly becoming “digital gold,” or a digital store of value in other words, due to the asset’s characteristics as an asset that is hard to seize, is available anywhere with internet, is decentralized and non-sovereign, and is extremely scarce just like gold.
Djie also looked at the ongoing coronavirus outbreak that originated in China as a likely bullish catalyst, claiming that the “rise in the BTC price correlates to the ongoing outbreak.”
This was echoed by Nigel Green, CEO of deVere Group. He told Bloomberg that “the ongoing upward trajectory of the price of Bitcoin correlates to the spread of the coronavirus.”
Indeed, when the Chinese stock market opened on Monday and plunged 8.5% near immediately, Bitcoin spiked 2%, literally all in the same five minutes, signaling that investors are flocking to BTC as a safe haven investment.
There’s also been some talk about how central bank monetary action is affecting Bitcoin.
Marija Veitmane, senior multi-asset strategist with State Street, told CNN Business that Bitcoin is likely benefiting from the fact that interest rates across the world are low and even negative, which has decreased the purchasing power of the U.S. dollar, aiding the rallies in BTC and gold too:
There is a new consensus building about dollar weakness. Bitcoin and gold may continue to do well as safe haven investments.
Gains Not Done Yet, Analysts Conclude
While Bitcoin and the rest of the crypto asset market have already done amazingly well in January, many say the rally not done yet.
Nigel Green said that “Bitcoin’s price is likely to continue to rise until the coronavirus peaks.” While data about the outbreak is still emerging, there’s been a consistent trend of confirmed cases rising by 2,000+ a day, suggesting that the outbreak has not yet peaked.
Although 20,000 of China’s over one billion citizens have been confirmed to have the deadly virus thus far, the actions taken to mitigate the virus spreading have been dramatic, hampering the economy and potentially presenting a case for Bitcoin to be used a safe haven as the abovementioned analysts expect.
On the technical analysis side of things, Litecoin has begun to break out, outpacing the rest of the market. In 2019, LTC started a massive rally that brought it hundreds of percent higher as the rest of the market posted mild gains.
But, after a long enough time, Bitcoin and its ilk began to trace Litecoin. This simple trend suggests Bitcoin could soon break higher out of the $9,000s.
