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#1 14-02-2020 13:35:12

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BTC/USD: why has Bitcoin been rising since the start of the year?

BTC/USD: why has Bitcoin been rising since the start of the year? What factors are at play here?

Bitcoin has risen by almost 50% this year to over $10,000 for the first time since October. 3 days ago, it reached its highest level in 6 months.

Technological factors, public expectations and macroeconomic trends are among the factors behind the rise in the Bitcoin, say analysts.

"It's fair to say that there's a new assessment underway", says Rod Mould, Chief Investment Officer at AJ Bell.

More fundamentally, many cite the growing demand for Bitcoin before its latest "halving" in May. Without going into technical details, it should be noted that this event, which is foreseen in the Bitcoin code and occurs approximately every 3 years years, is tantamount to slowing down the rate at which new "coins" are issued.

In the year following the two previous reductions, in November 2012 and July 2016, Bitcoin was multiplied by 80 and four times respectively. However, the exact proportion of the gains caused by the event is impossible to measure.

"This is a rare and observable factor - if you look at the previous events, in each case there was a fairly clear and discernible spike in the value of Bitcoin," says Windsor Holdan, a consultant who tracks the cryptocurrency market.

But others doubt that Bitcoin's latest rally is underpinned by anything more substantial than the previous booms.

"The recent rally was driven by the usual cycle of hype that we have seen three or four years", says Michael Rauchs, author of several university studies on cryptos.

"We have these mini-bubbles, and the momentum they create - with Bitcoins first, then with the other cryptos. It's a self-fulfilling prophecy."

Other factors cited for the rally, such as the increased demand for assets uncorrelated to traditional markets after the US assassination of an Iranian military commander last month, and in the face of the new virus crisis, are also questionable, since many of the essential qualities of safe havens are missing in Bitcoin.

Finally, recent comments by US Federal President Powell, who told congressional lawmakers on Tuesday that the Fed was "working hard" on the issue of a digital dollar are also a bullish factor according to some.

Central bank interest is also problematic as a reason for the rise of Bitcoin, since there is no real connection between a digital version of an existing currency and Bitcoins, although it should be recognised that this could help democratise the technology among the general public.

Hourly BTC/USD chart

"Anything worth having is worth going for - all the way." - J.R. Ewing


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