What is Bitcoin Doing?

It’s time we talked about bitcoin. Yes, about bitcoin. The prodigal son has indeed returned and has been acting rather differently this past week especially given his unruly behaviour over the last 6 months. Is he finally coming out of his shell? Let’s take a closer look.

The price of bitcoin currently stands at a little over $55,500, an increase of roughly 25% over the last week alone. With a market capitalisation of over $1.05 trillion it is safe to say October has started well for cryptocurrency’s first born.

What are the factors driving this growth? Is it different this time? Can bitcoin be trusted, or do we need to keep it under close supervision?

About bitcoin in the Current Economic Climate

As no doubt everyone is aware we are in turbulent economic waters. Supply chain problems, rising energy prices, weaker than forecast growth and climbing inflation are all combining to create a perfect environment in which bitcoin can flourish and show its true colours.

It is within this macro-economic climate that bitcoin has generated massive interest from institutional investors this week, with everyone from J.P Morgan to Bank of America finally accepting bitcoin’s potential.

While behaving like any other tradable tech equity, BTC, by its very design, becomes the perfect hedge in times of economic crisis due to its limited total supply.

Uncorrelation from Traditional Stocks

When NASDAQ and Dow Jones indices fell this week, many cryptocurrency advocates rejoiced as bitcoin began to move upwards and uncouple from traditional stocks. However, acting as an economic hedge is only part of the reason for BTC’s recent price surge.

Bitcoin’s coming of age really began on October 1st when Jerome Powell of the US Federal Reserve stated that he had no intention of banning bitcoin or any form of cryptocurrency.

This in turn restarted rumours concerning the launch of a futures-based ETF this quarter which brought added context to Bank of America’s recent comment that ‘bitcoin is too big to ignore’.

Additionally, there has been a massive recent increase in the purchase of bitcoin futures indicating that those in the financial know anticipate BTC to be trading at a significant premium by Christmas 2021.

J.P Morgan had a recent change in stance from May this year when the world largest investment bank reduced their exposure to bitcoin in favour of gold. However, this week the bank rescinded with the announcement that bitcoin was the perfect hedge in times of economic woe and was indeed ‘better than gold’.

Little Trouble from Big China

Over in China the crackdown on the mining of BTC and other energy intensive proof of stake cryptocurrencies has enhanced bitcoin’s reputation on the green stage and again adds to the attraction of bitcoin as a serious and worthwhile long-term investment.

The future certainly looks bright for the once maligned BTC and his handful of close associates. If they continue to behave, mature and provide a beacon of stability then a world of limitless opportunity is sure to present itself. Let’s hope so.