With the year that the bitcoin price is having, it’s hard to imagine that the digital currency is still relatively new–in the grand scheme of things. Case in point, on Wednesday (May 24), the cryptocurrency climbed well above the $2,000 threshold–reaching $2,400 to mark a new all-time high.
As reported by Reuters, the bitcoin price surge came as a result of new tokens being created for crowdfunding start-ups that use blockchain technologies. If you don’t know what blockchain is, in short it is an “underlying method” of bitcoin and allows for permanent records of “blocked” transactions.
Since January 1, 2017, the cryptocurrency has climbed from $998.47 to $2,423.92 as of 1:41 p.m. EST on May 24, according to Bitcoin.com’s price chart.
But, why is the bitcoin price rising so much?
Well, there are a few reasons that are believed to be the cause.
**This article is updated periodically. Please scroll to the top for the most recent information*
Bitcoin is certainly positioning itself to make history.
On Wednesday (May 10), the cryptocurrency soared above the $1,800 threshold for the first time in its history, a day after it surpassed $1,700 for the first time. According to Coindesk, the price of bitcoin has climbed well above 70 percent year-to-date–up from $997 in January.
Coindesk further notes that bitcoin’s price increase could reach a level analysts have said could “prove a key resistance.”
Case in point, Andrea Merdi, founder and CFO of bitcoin exchange, the Rock Trading, was quoted as saying: “I’m not worried about bitcoin … most likely we will see a correction, but the long-term trend has been and will be always up.”
That said, bitcoin’s price gains are, indeed, worth noting. Last week, Reuters reported that much of the price gains can be attributed to a high demand in Japan, where the currency is now an official means of payment. The publication further noted that Cryptocompare, a data website that looks at bitcoin trading, noted roughly half of the trading came from the bitcoin/Japanese yen exchange rate. Russia is also considering bitcoin as a legal payment method by 2018.
“The Japanese have recently warmed their approach towards bitcoin by treating it legally as a form of payment – a ratification and bringing into the regulatory fold,” Charles Hayter, the website’s founder, told Reuters.
That said, Japan isn’t the only the only reason for bitcoin’s latest price surge: BusinessInsider further noted the cryptocurrency’s hot spell is catapulted by the US Securities and Exchange Commission’s announcement that it’s reconsidering the Winklevoss Bitcoin ETF. The change of heart comes less than two months after the SEC first rejected the ETF proposal.
With Japan officially accepting bitcoin as a payment method, Russia looking to do the same, and the SEC reconsidering the Winklevoss Bitcoin ETF, interest in the digital currency is only poised to grow from here, and analysts agree.
“The biggest driver right now is you’re starting to see institutional investors take a keen interest in the entire sector,” Brian Kelly, founder of Brian Kelly Capital, told CNBC. “I don’t think this is hot money. This is real money that’s going to sit around and build the new internet.”
On that note, bitcoin has been the top-performing currency since 2010, excluding 2014, and is even rivaling safe-haven assets, such as gold. Year-to-date, the precious metal has increased 7.47 percent to $1,221.10 as of 2:34 p.m. EST on May 10, while the digital currency has soared roughly 70 percent, as mentioned above.
That said, the Economic Calendar notes bitcoin is “seen as a risker asset for investors” due to cyber breaches on bitcoin exchanges and a high number of daily fluctuations. Still, the publication suggests it’s becoming an increasingly popular investment option, even in the face of volatility, as it can “preserve value against currency devaluation.”
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This is an update to an article originally published on May 2, 2017
Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.