Bitcoin has rallied 25% so far in April, after crashing nearly 70% from its high of $18,000 earlier this year. What is causing this rally?
What we saw in December and January was a “bubble”. Get-rich-quick investors were drawn by the hype around bitcoin, and invested in their droves, pushing the price sky-high. Now, thankfully, a large proportion of those have got out, to be replaced by more institutional money: cryptocurrency funds, wealthy individuals and established financial firms. What has gone too are the futures contracts and the pump and dump strategies of the banks.
Oh, and we should also mention the 16,000 bitcoins that the defunct Mt. Gox dumped on the market over the past few days. Despite their dumping, the market proved to be remarkably resilient, with only short-term downward pressure on the price.
What we are seeing now is a calmer, more stable and predictable market for bitcoin at the moment. In fact, it is behaving remarkably like any other stock or currency behaves at the moment.As we write, it is rallying to challenge its 200 SMA (200 day moving average) price of $9865. Passing through or falling away from this marker can give us an indication of whether we will see continued growth in coming weeks, or whether the bears will once again take control. Whichever it is, with all that hype and frenzy gone – at least for now – everyone can get down to the real question about bitcoin – what need is it filling, and how well does it do that? The answer to those questions determines its value, at the end of the day.
Bitcoin has a value, although experts disagree on where that value lies. Some believe its value is as a security, such as gold. Others believe its value is as a currency – a form of trade. While the jury is still out on this, as the 17 millionth bitcoin was mined this week, one thing is clear. There is an appetite for bitcoin and cryptocurrencies that is not going away any time soon.