Bitcoin is skyrocketing

It’s a good time to own bitcoin.

Bitcoin is on a wild streak, surging markedly over the weekend.Right now, the digital currency is sitting at $691 (£487.36) – and earlier this morning, it nearly broke the $700 (£493.70) mark, reaching highs of more than $697 (£491.59).

In the space of a month, bitcoin’s value has jumped by more than 30% – from around $450 (£317.38) in mid-May to the sub-$700 mark it is hovering around today.

This is the highest bitcoin’s price has been in around two years – it last broke the $700 mark back in February 2014, when it was trending downwards following all-time highs of more than $1,100.

Bitcoin is infamously volatile. This time last year, it was just a third of its current value, around $230. But it has slowly regained value since, gathering pace over the last few weeks.

The price surge comes ahead of a halvening; later this month. This is a reduction in the amount of bitcoins produced by mining – the process whereby computers dedicate processing power towards creating new bitcoin. When it hits, the amount of bitcoin being introduced in a set time period will halve. As you’d expect when supply is about to be constrained, the price is spiking.

And just in case China, with its $30 trillion in troubled deposits and soaring capital flight is not enough, another, far less relevant catalyst, is the so called “halving” set to be unveiled in bitcoin in under a month. As a result, profits from mining bitcoins will be reduced in July, a process that’s written into the code to limit supply, according to Chinese exchanges OKCoin and Huobi.

“The halving of the supply of Bitcoin is attracting many retail investors,” Liu said. “More broadly, we continue to see follow-through from the blockchain hype cycle translating to interest in bitcoin the asset.”

But the real story here remains the momentum: it is well-known that habitual Chinese gamblers like nothing more than buying high any asset that has upside momentum (most recently observed in the “rebar” bubble of April), the reality is that nobody knows how far BTC can rise from this point on. The math is favorable: bitcoin still has a market cap of only $10 billion compared to total Chinese financial deposits of over $22 trillion.

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Bottom line: it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make sure their cost basis is zero going forward.

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