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  • Bitcoin price above $1,000: Why does it keep rising?


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    Although most of the financial world was fairly quiet during the past two weeks over the holiday season, one financial instrument continued its volatile climb upwards: Bitcoin.

    Sitting at just under $800 on December 20, Bitcoin prices continued their yearlong ascent even as traders were unwrapping their presents, sitting on beaches and toasting the new year.

    From December 20 to today, Bitcoin prices rose a whopping 25% to over $1,000, sitting at $1,012 as of the time of writing.

    Bitcoin one-year price chart, 2016. Source: Bitstamp.

    Bitcoin prices have been here before, in early 2014, when the cryptocurrency was a much less well known entity and a sudden feeding frenzy likened to the Dutch Tulip Mania saga sent prices skyrocketing, only to quickly fall back down to earth.

    So what is driving Bitcoin prices higher?

    In two words, China and Politics.

    Chinese traders make up the bulk of Bitcoin trading volumes. And what’s been on the mind of Chinese traders recently has been their rapidly depreciating currency. Much as Bitcoin has steadily risen the past 12 months, The Chinese Yuan is mired in a year-long slump versus the US Dollar and other major currencies.

    USDCNY one-year chart 2016. Source: XE.com.

    With the Chinese government clamping down on hard currency conversions and transfers, and the value of their money falling, many Chinese traders have been bidding up the price of Bitcoin as a safe haven, easily transferable way of protecting the value of their wealth.

    But it is not just Chinese traders turning to Bitcoin.

    Donald Trump’s election gave Bitcoin prices and popularity a nice bump. Trump’s ultimate governing mode still remains a mystery less than three weeks from his inauguration – will his policies lead to growth, inflation, both or neither?

    With the Brexit vote more than six months behind us, the citizens of Europe and traders around the world still don’t know what will ultimately happen and what the ‘new Europe’ will look like.

    With traders not too bullish on any particular currency with all these and other issues swirling about, many traders have turned to the one currency lacking political control – Bitcoin.

    As we wrote above, the last time Bitcoin prices crossed the $1,000 barrier three years ago things quickly reversed leading to a year-long swoon. Will things be different this time?

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    Bitcoin price above $1,000: Why does it keep rising?

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