Bitcoin is famous for its volatility, but it has been unusually quiet in recent months. The digital currency had been hovering in a narrow band between $ 9,000 and $ 10,000 for almost all of the last three months, until a sudden breakout in the last week.
On Monday, the price of Bitcoin touched $ 11,000, which is an increase from around $ 9,100 a week ago. This is remarkable given that Bitcoin has been unable to stay above $ 10,000 the few times it has broken that mark, and how it has not crossed $ 10,500 in almost a year.
So what is driving the new price increase? There does not appear to be a single catalyst, but multiple overlapping factors, according to experts.
Messari Research’s Eric Turner noted that cryptocurrency traders have been making huge profits from dark digital currencies on so-called “DeFi” (decentralized finance) platforms. Turner speculates that many of these traders have invested their earnings in the two most mainstream crypto assets, Bitcoin and Ethereum, and increased the price.
Bitcoin prices may also have a tailwind thanks to last week’s letter from the Office of the Comptroller of the Currency, which said banks can hold Bitcoin on behalf of their clients. Many in the crypto industry have treated this as a bullish signal and predicted that it could lead to new investment in cryptocurrencies from large funds.
Another possible reason for the recent price increase is a widespread sense of fear and uncertainty around the world. Such sentiments may prompt investors to seek assets such as gold, which has collapsed amid concerns over the pandemic and geopolitical uncertainty. A report by The Block suggests that Bitcoin can benefit from the same phenomenon.
Finally, Bitcoin may be rising based on underlying fundamentals.
Sluymer also pointed out that Bitcoin needs to break out of a $ 10,500 “resistance band”. Once it does, as it appears to have happened on Monday, it suggested that the coin will hit the next “resistant band” at $ 13,800.
This type of technical analysis is consistent with a “wave theory” of price movements and a related analytical tool known as the Fibonacci sequence, which gained traction during the cryptocurrency bubble of 2017.
However, none of this provides a definitive explanation for Bitcoin’s latest rally, and the latest surge could, like so many other manifestations of crypto over the years, be temporary.
