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24 July


Here’s Why Bitcoin’s Price Is Suddenly Exploding

Bitcoin’s price has broken $15,000 - breaking highs not seen since the 2017 bull run

Photo: Getty

/NOVOSTIVL/ Institutional investment is one of the biggest reasons why Bitcoin’s price keeps going up. Bitcoin has added nearly $5,000 to its price in the last month, has shot up $2,000 in the last two days and is currently at around $15,600 - quite the ride.

In August and September of this year, MicroStrategy invested a total of $425 million in Bitcoin. One month later, Square followed suit, investing $50 million in the famed cryptocurrency. Also in October, PayPal announced features that allowed users to trade in Bitcoin, as well as Ethereum, Litecoin and Bitcoin Cash. All of these high profile moves have worked wonders for Bitcoin’s explosive growth.

“The recent flurry of institutional activity - particularly the involvement of a household brand like PayPal - has undisputedly impacted the price of Bitcoin as mainstream interest and trust in this form of investment often increases following such news,” Antoni Trenchev, managing partner of Nexo.

As MicroStrategy announced its first Bitcoin investment on August 11, 2020, CEO Michael Saylor picked out several features of Bitcoin that makes it so appealing for long term investment. These included Bitcoin’s brand recognition, network dominance, and technical utility. He even went as far as to describe Bitcoin as “digital gold.”

Bitcoin’s positive press has not been limited to MicroStrategy, however. As Square announced an investment of $50 million - or 1% of its total assets—the company’s chief financial officer at the time, Amrita Ahuja, said Bitcoin was part of the company’s strategy for “building products based on a more inclusive future.”

It is clear Bitcoin has benefited immensely from such good publicity. Square put its money when its mouth is when it invested $50 million in Bitcoin, but now, Square’s customers are following its lead.

The correlation with Tether

According to Tether’s transparency data, the USDT market cap broke $17 billion for the first time in history. As the largest stablecoin in the cryptocurrency industry, Tether’s growth has often been seen to correlate with Bitcoin’s price increase.

“Again, the BTC price soared right after the number of stable coin deposits increased,” Ki Young-Ju, CEO of CryptoQuant, reportedly said.

One reason for this correlation is that buying Tether is a way for investors, particularly those in China, to buy Bitcoin. According to a Chainalysis report in August of this year, Tether is the “de facto fiat stand-in for Chinese cryptocurrency users.”

One of the reasons for this is that China is particularly harsh on capital flight - in other words, moving funds out of the country. Tether, with its value tied to the US dollar, has given Chinese investors an alternative way to invest.

The stablecoin allows the Chinese crypto community to access the cryptocurrency market by interacting with a highly liquid and integrated currency, acting as an on-ramp to further Bitcoin demand.

And as demand ramps up both by institutional players in the US and by Chinese investors, Bitcoin's limited supply is having an even greater impact.

Source: Decrypt.