Cryptocurrencies

Bubble incoming? Bitcoin price up 33% this week

Ben Weiss, Tuesday, 14 May 2019

Bitcoin’s price ended trading on Friday at around 6261.9 and opened again on Sunday morning at 7170.9. It has since continued to rise to a ten-month high of 8330.5, a total increase of 33% since market close on Friday evening. But what has caused this latest price escalation, and is another Bitcoin bubble on the way?

Bitcoin price 14.05

Chart showing Bitcoin’s price over the last 96 hours.


Why has Bitcoin’s price risen?

Bitcoin’s price rising is, for one, said to be down to the Consensus Conference that’s currently being held in New York. It’s an annual conference held for those interested in technology, Blockchain and cryptocurrencies. Given the fact that Bitcoin’s price has risen throughout 2019, it’s likely that sentiment towards the cryptocurrency has been positive. This could have reverberated across the conference, with professionals and experts perhaps speaking of further rises – prompting an increase in long positioning.

Another reason is that general investment in all cryptos seems to be increasing, with one source claiming ‘institutional money (is) flowing into cryptocurrency.’ From Ripple to Ethereum, cryptos across the board seem to be having a positive 2019. Even despite the recent hacks to exchanges such as Binance, cryptos remained bullish, which implies investor sentiment has grown even stronger.

Bitcoin price peak

Chart showing the last point at which Bitcoin reached its current price.

Is another bubble on the way?

If you speak to crypto experts, many of them feel a return back to the $20,000-mark is coming for Bitcoin. Bitcoin’s price rose to its high in December 2017, before taking an almighty crash that only subsided at $3,100 dollars (at its lowest) in December last year. But the recovery made since, in what we have seen to be, substantial and sustainable growth over a consistent period of time, bodes very well for Bitcoin.

The first bubble crashed so spectacularly because as soon as the price fell considerably, investors had no evidence to suggest Bitcoin was ever going to reach such highs again. An investment in Btc. in September 2017 at 7,000 would have still seen a decent return even in mid-January after the crash.

At that point, Bitcoin was at 10,000, but there was little evidence to suggest it was anything other than a one-time bubble. The hype surrounding the crypto may have simply driven prices to an unsubstantiated level, when in reality it was significantly less valuable.

In fear of seeing a once-valuable investment become next-to worthless, many ‘cashed out’ at this point as there was no precedent to suggest Bitcoin would ever recover. However, with this current spike showing that Bitcoin has, by most accounts, made at least a partial recovery, that precedent now exists.

As for another bubble, what we could experience instead is even better. If this trend continues, we could see Bitcoin’s price simply continue to gradually increase. A bubble may occur if investors get too eager and back Bitcoin heavily – causing a sharp price rise that could lead to a snowball effect of long positioning. But at the moment, it seems as though Bitcoin is resisting another collapse with strong resilience. We may not see another bubble until the price of Bitcoin surpasses its previous highs – if of course, it ever does.

Would another Bitcoin bubble be bad?

It depends on the definition of ‘bad.’ It would undermine the growth it has had this year and send the crypto back down, but it could be very interesting to see how it would react from there. Would it stagnate as it did before for a number of months? Would it recover quickly as traders remain optimistic and positive after knowledge that Bitcoin can stage a revival? What price would it even fall down to?

Were it to recover again, in a shorter amount of time, the cat would really be thrown amongst the pigeons as investors would get further reassurance that Bitcoin has a certain bouncebackability that makes it a safer investment.

A bubble would be more interesting than specifically bad. But of course, most would much rather this persistent growth to continue at this rate.

 

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