The Bitcoin is Rallying at the end of 2016 but the Reasons Remain ElusiveDecember 24, 2016
The value of bitcoin recently passed the $900 mark and delivered a huge boost to the entire cryptocurrency market. The spike in the price is, in fact, the highest value of a single BTC coin in the last three years.
The success of 2016 is now unreliable for the bitcoin community. At the beginning of the year, BTC was trading just over $400 but since then, their value has steadily grown. Now, it appears that the digital currency is entering the price range close to the previous high moment in late 2013. This time, a bigger number of digital wallets are in play, along with a multitude of companies, trading exchanges, and many more aspects of a growing ecosystem.
Yet, while the good news keeps on arriving both from the markets and the legislators who are more open than ever to bitcoin, the reasons for the spike continue to baffle many analysts. On the other hand, the mainstream media has given up on trying to present the complex bitcoin picture and instead settled for reporting on the most understandable facts like price changes, hacks, and similar no-brainer events.
But, in spite of this, there are still forces that are pushing the price of bitcoin towards the $1k threshold that could be reached early on in 2017, if not even in this year. Some might be clearer while others are harder to spot, but they still combine into a force that created an impulse for BTC that has not been seen in several previous years.
The Chinese currency lost a substantial part of its value over a previous year. In 2016, the assertion is that Yuan lost about 7% of its value and the same could be the biggest reason why the BTC rally took place. Even now, the bulk of BTC trading takes place on Chinese exchanges where people are using bitcoin to circumvent the national laws which limit the number of money citizens can exchange.
With an unclear political trajectory about the issue of devaluation, no one can know for sure if the new drop in value will occur in months, weeks or days, or even if it will occur in the near future. Like always, the Chinese government is holding their cards close to their chest.
However, the Chinese citizens who possess money they want to protect are not taking this sitting down. Instead, many took on bitcoin as a means of both protecting and diversifying their holdings. By changing currency, they are making it insulated from the price drop. At the same time, any purchase of BTC is also an investment opportunity that can lead to a further gain in assets. While any trading of this nature is a risk, many Chinese clearly believe it is well worth it.
The influx of Chinese capital was definitely the biggest element relevant to the growth of bitcoin price in 2016, but is it the only one? Certainly not.
Instability and Change
The world of geopolitics has always a tricky domain where making assumptions is the first step towards getting it wrong. Today, however, seems like the same notion has been placed on steroids. The changes that took place in 2016, especially in the Western part of the geopolitical globe are biggest since the fall of the Iron Curtain. Brexit and the victory of Donald Trump in the US Presidential elections clearly show a huge change in the global western sentiment.
The warring element in the same mix, aside from the obvious one, is also the complete lack of insight of all those who are bound to be insightful by their professions – both politicians and the media failed to gauge the mood of the electorates in the US and the UK. For ordinary people who use bitcoin to bet online and do many similar end-user activities, this translated to one thing – uncertainty.
In times like that, people who are a lot more informed today than half a century or more ago decided to look for pontifical alternatives. Now, as Trump’s administration prepares to take office, several of its prominent members are bitcoin supporters. But, there is only a small chance that this aided the growth of BTC price. Instead, the very ascendance of Trump cabinet is what got so many people worried that they started entertaining the notion of acquiring BTC.
It appears that many decided to realize this idea and the same process pushed the BTC price from East and West. A final factor shows an additional influence, this time coming from the metaphorical south of the geopolitical globe.
Indian Fiscal Policy
Among many fiscal changes in 2016, one of the less broadly reported came from India. There, the government made snap decisions which include taking some banknotes from circulation practically overnight.
This came as a wider attempt of the government at trying to assert control of its paper currency. The moves were not met with universal approval in the Indian society, but the process was neither stopped. Now, it is ongoing and similar to China, few know for certain where it is heading next.
This places three of the biggest economies of the world in a situation where bad news can be expected at any moment. With the pressure from that type of an environment, India is expected to be the next bitcoin boom destination. 2017 looks like a great year for this to happen and the price of BTC is reflecting that expectation.
A Throw of a Dice
As the price is set for the next goal of $1000, the value of all bitcoin that are currently in circulation is greater than $14 billion. But, the next period will have to take a page out of the fast eSports handbook – here, the bitcoin community will have to make the best possible decision in a short amount of time, using only the fraction of data they would desire to have.
If the next year remains similar to 2016 in terms of volatility, BTC should easily get to the 1k price range. But, the way the community uses this fact in that future moment needs to be analyzed and assessed right now if there is to be a chance of using the spike in price to bitcoin’s long-term benefit.