Bitcoin is Going Up: What’s Behind the Sudden Surge?

After starting 2019 in a similar trend to the previous cataclysmic year, the Bitcoin price finally seems to be in the ascension as we enter spring. After a month or two of sideways trading around the $3,500 to $4,100 range, the price exploded at the start of April, as if spurred by some great news, to a yearly high of around $5,640. The curious thing is that there doesn’t seem to be one major driving factor encouraging people to buy into the number one cryptocurrency by market capitalization. As of today (May 20), the price is even more promising - $7,900.

That said, even at today’s rate, we are still looking at around a 40 percent increase in the price of Bitcoin. It appears that sentiment is changing in the market. As usual, this has been caused by a myriad of factors rather than just one.

So, what’s behind the surge?

There are several analysts who believe the Bitcoin winter is finally over, meaning that all those who were prepared to sell as a result of the spectacular crash in early 2018 have now done so. Tom Lee is one to voice his opinion in such a way. The Fundstrat Global Advisors Head of Research has recently appeared on CNBC’s Future Money segment to talk about the crypto market.

He stated that his team had identified various indicators that are unlikely to be observed during a bear market. Although the long-term Bitcoin bull did not detail all 11 of these indicators that he shared with his Fundstrat clients, he did talk about the most crucial causes of the upwards momentum experienced thus far in 2019.

Real usage

Firstly, Lee addresses the increasing on-chain transaction volume on the Bitcoin network. The financial researcher observes that the number of transactions being processed has shown a year-on-year increase this January. Thus, the factors like adoption and global usage are a precursor to higher prices.

Driving a lot of this new volume, according to Lee, is real adoption in parts of the world suffering the most severe effects of a mismanaged economy. He mentioned Venezuela and Turkey – both nations suffered crippling currency devaluation in previous years – as driving up to 30 percent of the new transaction volume alone. Ultimately, real usage is far more important than all the hedge funds and trading desks in the world. Permissionless, decentralized finance can do far greater things in the developing world than it can in first-world countries. It is encouraging to see people using Bitcoin to opt out of their national economies in a way never previously possible.

Institutional interest

However, Lee also blames a lot of the current increase in prices on a greater institutional interest in Bitcoin and the crypto asset class in general. There is no better signifier of this than the fact that the likes of Fidelity Investments are rushing headlong into the cryptocurrency space with new ventures - Fidelity Digital Assets, a tailored institutional custody offering.

Likewise, the Intercontinental Exchange – the parent company of the New York Stock Exchange – is still keen to have its Bakkt platform greenlighted by regulators, so that price discovery of Bitcoin can be made at a regulated, trusted exchange. The fact that both Fidelity and the ICE are even bothering to risk their reputation on being the first to market with trusted, established, institutional-grade crypto products is telling of the demand they must be experiencing from the planet’s most respected money managers.

Lee also states that he has personally spoken to many fund managers from around the world. He claims that they all report around a 60 to 70 percent increase in interest from clients. Such over-the-counter buyers don’t make a dramatic impact on price immediately. However, when retail buying pressure increases sufficiently, the shortage of Bitcoin available to buy will certainly drive prices skywards.

Useful upgrades

Finally, there is the fundamental argument for higher Bitcoin prices. This is to say that the asset itself is fundamentally more useful than it was at the height of the bull-run mania in 2017. Since then, the Lightning Network upgrade has proved itself as a useful micropayment solution to take small transactions away from the blockchain itself, thus allowing for more transactions to occur per second. So far, the Lighting Network is having an amazing year too. It has been lauded by the likes of Jack Dorsey of Twitter. His team has developed a social media plug-in so users can tip others online. It has even seen real-world adoption with rap icon Lil Pump integrating the payment solution on his clothing line website.

The technology also had an extremely high-profile demonstration of its capabilities during the rounds of the so-called Lightning Torch. The idea was that well-known crypto personalities would send a payment from one to the other, each time adding little Bitcoin along on the way, using the Lightning Network. Fidelity Investments, Jack Dorsey, and even Miss Universe took hold of the torch until it was recently extinguished. The event brought a great deal of publicity to the nascent technology.

To sum it up

So, there isn’t really one thing that has happened in the Bitcoin market to spur the prices to the recent yearly highs. It appears that the market has indeed bottomed though, and that fundamentals, technology, and real-world adoption will trump market pessimism once again going forward. Well, if Tom Lee is correct in his new Bitcoin price calls!