For much of its history, bitcoin traded below the $6,000 mark. Then, in 2017, the price of bitcoin skyrocketed, reaching around $21,000 per coin in December of that year.
In hindsight, it was clear that a kind of mania was driving those prices. But taking a long view of history, it’s clear that what bitcoin is currently experiencing is by no means unusual. Even within the context of its own history, the present vicissitudes are hardly new, just on a larger scale.
Take equities, for instance. It took two decades in the 19th century for owning a share in a publicly traded company to become a widely accepted financial instrument. In the early days of traded shares, prices swung wildly as people tried to work out how to value the companies they represented. But over time, the market became more efficient, and slowly equity prices stabilized. Of course, there were crashes along the way, similar to what bitcoin is going through now, but the long-term trend is unequivocally upwards. Companies, overall, keep getting better at what they do and over time do more to provide their shareholders with value.
Bitcoin has seen several price crashes in its history. Back in 2013, bitcoin crashed seven times, losing upwards of 68 percent of its value in some trading sessions. On April 10, 2013, the currency fell from a high of $260 to around $140. So what is happening right now is hard without precedent.
Will Bitcoin Rise Again?
The question of whether bitcoin will rise again is central in the investor world. From its lows in 2013, it took nearly two years to recover and exceed its high from April 10, 2013.
Currently, the technicals seem bullish, but they are open to interpretation. Analysts, such as Tom Lee of Fundstrat are estimating that bitcoin could breach the $20,000 mark and hit $25,000. Others, including Arthur Hayes, aim even higher, suggesting that we could see valuations more than $50,000.
Technical analysis of the bitcoin price history suggests a turning point. Several times over the last couple of months the price has hit the resistance line and formed a candle. Furthermore, the ten-week exponential moving average is about to cross over the 21-week moving average, meaning that there could be an uptick in sentiment.
Factors Pushing Price Increases
There are some excellent qualitative reasons to believe that the price of bitcoin is indeed due for a rise. Yale University, for instance, says that it is now investing in the cryptocurrency space. And given that it has billions of dollars of investable capital available to it, this may have a measurable effect on the price, especially if other institutional investors follow suit.
Institutional buyers tend to be in the market for the long term. Unlike retail investors, they are keen to buy these new classes of assets whether they are high or low. They are not trying to time the market, so to speak: instead they are looking to diversify their portfolios. These buying patterns suggest that at the institutional level, investors believe that cryptocurrencies have a long and robust future.
Because institutions have so much capital, even a small change in their preference for bitcoin is likely to result in substantial changes in price.