After an extended period of negligible movement, the last few weeks have been good – exceptionally good - for bitcoin’s price. In fact, the rally has seen bitcoin break its 2015 ceiling a number of times in succession. With the average price hovering around the £150 mark for most of the preceding 6 months, bitcoin smashed a new high today now trading at approximately £245 on the open market.
So after a relative flat line, what’s driving the bullish streak? I’m of the opinion that there’s a trilogy of underlying forces at play here.
With a weakening economy and capital controls in place, Chinese-based bitcoin exchanges are reporting unprecedented activity levels. They’re leading the price rise with some trades concluding at a premium of between $10 and $15 more than their European or American based counterparts.
Bitcoin’s price is no stranger to the persuasion of frantic nationals looking for a means to keep their wealth secured in the face of stringent monetary policies and limited spending. As we saw at the pinnacles of financial crises in both Cyprus and Greece, bitcoin has become a popular hedge, untouchable by meddling governments, and this flurry of activity bolsters the price.
In the latter half of October 2015, the European Court of Justice ruled that, for tax purposes, it should be treated as a currency and therefore not subject to VAT on transactions. This long-awaited ruling provided clarity as regulators grappled with whether it should be considered a direct alternative to money, or as a commodity.
While I’m against the attempt to regulate Bitcoin as a technology and network, this decision is welcomed by businesses in the bitcoin world, providing clear guidance on processes and procedures to take in dealing with bitcoin. And it would appear that sentiment is warmly received by bitcoin end users too, as the ruling sparked an immediate bump in activity and prices.
I hesitate to say it, but it would appear that even after its collapse, Silk Road continues to make an impact on bitcoin price. With the FBI auction of the last remaining confiscated bitcoins mere days away, I have a hypothesis that there’s a level of underhanded trading happening to drive prices up.
This would not be the first time we’ve seen trading activity undertaken to manipulate price performance. In 2014, it was widely speculated that the now-defunct Mt. Gox used automated purchasing to inflate bitcoin price in an effort to salvage losses. While the theory is pure speculation on my part, and I’d love to be proven otherwise, I wouldn’t be surprised to learn that there’s at least some trade happening in an effort to boost profits from the imminent auction.
Despite the catalyst(s), I for one certainly have my eye on the boards and even in the case of a slight pullback on recent gains, this run once again proves that as perceptions are challenged, and interest increases, so too does the bitcoin price.
Photo credit: The NY Charging Bull by Prayitnophotography