The brief rally of bitcoin earlier this week elicited fresh hopes to the cryptocurrency space that the industry has entered the bull market anew. Bitcoin jumped $8,000 but this has also left many investors speculating whether it is on its way to another crypto bubble.
However, the rally was not sustained as bitcoin fell sharply on Friday, trading at $7,293.24 down 7.97% over the past 24 hours, data from CoinMarketCap.com showed.
Multiple factors are contributing to the latest bitcoin price surge that is based on bitcoin’s strong fundamentals and recent market-moving news, stated Ben Waters, head of International Markets at IOST. He explained that back in November 2018, a number of events including the Bitcoin Cash “hash war” flooded the market with an increased supply of bitcoin at a time when there was little interest in cryptocurrencies, driving down the price down from $6,000 to $3,000.
“At this point, the price of bitcoin to many was undervalued, resulting in smart money taking advantage of the dip and entering the crypto market,” Waters said. “In the past three to four months, we have also seen institutional players such as Bakkt and Fidelity Investments make significant traction in the space, further indicating mainstream acceptance and legitimizing of crypto as a burgeoning asset class. During that time, many of the popular crypto projects that have survived through crypto winter are finally materializing.”
More recently, investors are looking at bitcoin as a way to diversify their portfolios against the volatile equities market, which is currently being exacerbated by geopolitical tensions such as the U.S.-China trade wars.
In addition, a few days ago saw a flurry of bullish news, including Microsoft deploying an identity network on the Bitcoin blockchain, Bakkt set to launch BTC settled futures contracts with custodial solutions next week, Wholefoods and Starbucks now accepting Bitcoin, and rumors of Ebay moving into the space. With record daily transactions, trading volume, low fees, and continued development, including Lightning network and segwit adoption, Bitcoin’s fundamentals are stronger than ever. Bitcoin is now back on the radar of savvy investors, and the crypto asset class may just be getting started.
Matt Luczynski, CEO, and co-founder of blockchain-based hotel booking platform Travala.com added, “Recent institutional developments such as the announcement of HTC’s new smartphone with full node capabilities for the Bitcoin blockchain or updates about Facebook’s Libra could account for the sudden spike in prices. As more developments involving prominent names continue, we can hope to see the end of bearish trends, ushering in a potential long-term bull market.”
He said that although a level of speculation often characterizes discussions surrounding cryptocurrencies, positive market sentiments are always a good sign for the industry and a price spike often accompanies an increase in bitcoin prices for other altcoins.