Since hitting its recent low of $3,867 on Mar 13, bitcoin has jumped three folds with year-to-date gains of about 65%, per a Wall Street Journal article. The cryptocurrency is now hovering over the $11,000 mark. In fact, the cryptocurrency has skyrocketed way more than 100% since this year’s low touched in mid-March. With the current pricing, Bitcoin is edging toward the one-year high of $11,956 hit last August.
Many industry experts have been scratching their heads to understand the logic behind the monstrous rally in Bitcoin, that too in such a trying time like this. Bitcoin is an extremely volatile asset due to lack of its acceptability. The currency is still trading well below its late 2017 peak when it hit $20,000.
What Drove the Rally?
Due to the unprecedented global fiscal and monetary stimulus, almost all asset classes — stocks, bonds and commodities — rallied in the past four months. The S&P 500 jumped 27%, the S&P GSCI commodities index climbed 33% and the Bloomberg Barclays US Aggregate Bond Index gained 3.3%. This is the best combined four-month performance for those indexes since at least 1976, if we go by the article published on Wall Street Journal.
No wonder, bitcoin too gained in the investing boom. Moreover, an article published on CNBCnoted that Bitcoin is emerging as a safe-haven asset like gold. SPDR Gold Shares (GLD – Free Report) has rallied this year as gold hit an all-time high thanks mainly to safe-haven demand and extremely low U.S. interest rate levels. A few years back, an analyst had said, “the cryptocurrency could be referred to as digital gold, as it shares many of the characteristics that makes the precious metal a great store of value.”
Cryptocurrency is also being fast accepted by big corporate houses and governments. For instance, JPMorgan Chase & Co. (JPM) has introduced JPM Coin — a digital coin designed to make instantaneous payments using the blockchain technology. AT&T Inc. (T) has also started accepting crypto payments.
Square’s Cash App witnessed bitcoin revenues during the first quarter of the year soaring 367% year over year, surpassing revenues from the fiat currencies. Facebook (FB) also proposed the launch of a crypto project — Libra. China’s central bank started its digital currency project in 2014. Singapore is one of the nations that has led research into central bank digital currencies (CBDC) with its multi-phase Project Ubin.
Per analysts, a dovish Fed, negative real interest rates and the search for a new reserve currency have boosted demand for bitcoins of late. “The United States printed more money in June than in the first two centuries after its founding,” per an industry expert. He sees bitcoin as the solution to the ongoing crisis.
Will the Rally in Bitcoin Last?
The number of daily transactions on the bitcoin blockchain has hardly crossed 350,000 at any point in the past year, per Wall Street Journal. This means investors’ interest is…