Bitcoin (BTC-USD) is back in a big way in 2020.
The cryptocurrency has rallied almost 150% so far this year, including a gain of 70% over the last few weeks. Bitcoin is now at its highest level against the dollar in three years and analysts are starting to wonder if it could reach new all-time highs.
“The door is still wide open for the digital currency to challenge its all-time,” said Naeem Aslam, chief market analyst at Avatrade.
Bitcoin reached a record high of $19,783.06 (£14,946.40) on 1 January 2017 — just before the bubble burst and the price rapidly fell back to trade near $3,500.
Since then, bitcoin has struggled to hold above $10,000 — that is, until this year. The cryptocurrency began creeping higher over the summer before rapidly rising from October onwards. On Wednesday, the cryptocurrency briefly rose above $18,000 for the first time since 2017.
The bull run has caught many analysts by surprise.
“What’s remarkable this time is the lack of hype around Bitcoin,” said Neil Wilson, chief market analyst at Markets.com.
Media coverage and Google searches are nowhere near levels seen in 2016 and 2017 when bitcoin prices rapidly spiralled higher.
The ongoing COVID-19 pandemic has likely helped fuel at least some of the rally. Many evangelists argue bitcoin is a safe haven asset akin to gold. JP Morgan (JPM) said in a note last month there is a generational divide, with millennials preferring bitcoin and older investors opting for gold.
Still, the majority of bitcoin’s gains have come in the last few weeks even as positive vaccine news has emerged.
Mati Greenspan, founder of Quantum Economics, which specialises in cryptoassets, said bitcoin was being supported by more mainstream adoption.
“Increasingly large players are entering this tiny market,” he said.
Square (SQ), Jack Dorsey’s payment company, invested $50m in bitcoin in October. The company has let people buy crypto through its Cash app since 2018 and Square said earlier this month that 80% of Cash’s third quarter revenue came from bitcoin trading.
“We've seen this dynamic play out in 2017 with the retail market,” said Greenspan. “When everybody is buying and nobody is selling, it doesn't take a lot of volume to push the price higher.”
PayPal (PYPL) recently backed bitcoin too. At the start of October, the company said it would allow customers to buy and hold crypto through its app. JP Morgan called the endorsement a “big step” for the market.
And traditional financial players are increasingly getting in on the market. Hedge fund manager Paul Tudor Jones bought bitcoin in May as a hedge against inflation, one of the highest-profile endorsements from a traditional money manager.
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“While a lot of scepticism still surrounds cryptocurrencies, some in the investment community appear to have warmed to them,” said Michael Hewson, chief market analyst at CMC Markets.
In combination, these factors have helped put bitcoin on a tear. The bull run could well continue into 2021 — although if 2017 is anything to go by, prices could crash rapidly once bitcoin peaks.
The price fell on Thursday morning — down 2.6% to $17,399 — but the all-time high remains in sight.
“Bitcoin is clearly overbought across most short- and medium-term timeframes, so a brief pullback is likely soon, but the world’s oldest cryptocurrency has closed exactly three days above the current price near $18,000, so there’s little in the way of overhead resistance to prevent new all-time highs this year,” said Matt Weller, global head of market research at GAIN Capital.
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