Bitcoin on fire !
Bitcoin on Fire – In the past month from 5th October to 5th November we have seen the Bitcoin price surge over 68% – from $4400 to $7400. This is extreme even in the Bitcoin and Cryptocurrency markets, what could be behind this exponential rise of Bitcoin in just over a month?
We have seen Bitcoin dominance exceed 60% of total Cryptocurrency market capitalisation – coming from below 50% just a month ago – this gives us the first clue in to what could be causing Bitcoin to surge.
Theory 1 – supported by the dominance data, people are selling other Altcoins to increase their Bitcoins holdings. This could be due to the upcoming forks (see What the fork – blog).
Theory 2 is connected to theory 1 – Because people expect Bitcoin price to surge, we see an increase in margin trading to buy more Bitcoin. This is when traders take out a loan from other Bitcoin holders to buy Bitcoin with, expecting it to rise in value. There has been a surge in margin trading from major exchanges that support it (See Bitfinex and Poliniex). Therefore the price rise in Bitcoin is also supported by debt, that would need to be paid back after the profits are made.
Theory 3 – Market FOMO. This is typical behaviour in markets, when the price rises – new traders enter the market and keep buying Bitcoin to get a piece of the profits. The bigger the rise, the greater the headlines . . . . more and more people find out about Bitcoin and hence enter the market. Coinbase – an exchange in the United States of America, reported that they are signing in 100 000 new users every day, that is amazing – the news drive the adoption and that drives the price and hence the cycle continues.
What are your thoughts, what is causing this rise in Bitcoin? Post comments below: