You can count the number of times bitcoin traded above the current price on one hand.
In Dec 2013, the all-time high in Canadian dollars touched the $1300s. There was only one day in 2013 & 1 day in 2014 where BTC traded above the current price.
The price in USD is not near the-all time high yet, but it’s risen to $850 from last week at $750, and it’s the highest performing asset class of 2016.
Bitcoin is now at an all-time high market cap in USD, at over 14 billion. Still a tiny drop in the bucket for a currency, in fact, we just surpassed Twitter’s market cap yesterday.
People wonder “Can bitcoin sustain the price this time?”
Bitcoin Nearing All-Time High
The bitcoin infrastructure is much more mature than it was in 2013.
In 2013 we had 3rd rate exchanges built on buggy insecure PHP code leftover from a magic the gathering trading card exchange. (MtGox was the biggest exchange back then, it stood for Magic The Gathering Online Exchange)
Well, today we have a global network of sophisticated venture-backed exchanges with VC investors – Bitstamp, Coinbase, Kraken – and insurance companies underwriting against theft & hacking like CryptoFacilities.
Today we have the CME (Chicago Mercantile Exchange, one of the oldest futures exchanges) now pushing a bitcoin price index to Bloomberg terminals for professional trading firms.
We have the SEC in the final stages of approving the COIN bitcoin ETF (from the Winklevoss Twins of Social Network fame) which will bring BTC investment to institutions, hedge funds, and retirement funds.
People also wonder, “Who uses bitcoin, does usage impact the price?”
Global War On Cash. Have you heard of it?
There is a real global war on cash right now. Citizens of India, Venezuela & China are flocking to bitcoin as their countries devalue their currency.
Imagine if your government said “The $100 bill is no longer legal tender, you have 30 days to exchange them for $70 worth of small bills. You are limited to taking $50 per day out of ATMs until further notice.”
This is what is happening for over 1 billion people on the planet right now.
When banks and governments start doing this, citizens start to look to store their wealth in an asset class other than their native fiat currency. This is called “capital outflow” and it’s happening big time in 2016.
Traditionally citizens in these countries will turn to silver or gold…but now 75% of the population has access to the internet and a cell phone, and since bitcoin is the money of the internet – it’s much easier for someone to store their wealth on a cell phone in bitcoin than in gold.
Because of a global adoption of bitcoin we have an all-time high for the amount of transactions taking place on the bitcoin blockchain – the network is much bigger compared to 2013. (If you do a Metcalfe’s Law calculation on transactions as a proxy for size of the network, 1 BTC equals $2500 by 2017)
We haven’t even factored in the psychological impacts of negative interest rates in countries like Japan, something that has never before seen in human history…thinks about that one. The bank charges YOU to deposit money.
There’s also a record number of bitcoin wallets being created monthly. 2016 has seen the hockey stick exponential growth in the amount of new users on the bitcoin network. (chart attached)
Another thing people wonder about, “Isn’t bitcoin too volatile to use as currency?”
Bitcoin too Volatile?
Check out the volatility chart below by Willy Woo. Contrary to popular belief, bitcoin isn’t the most volatile asset. Fiat currencies have actually started becoming less stable than bitcoin this year.
This last month has seen 7% peak volatility in BTC compared to EURUSD which peaks at 5.5%. Bitcoin bottomed out at 2% volatility.
The Euro has had a wild ride this year with Brexit weakening the Euro & Trump’s election strengthening the dollar. After the ECB announced a new round of quantitative easing this month (printing more invisible money from nothing), the EUR has hit it’s lowest value against the USD since 2003.
Fiat currency volatility is up; bitcoin volatility is down.
Investors typically wonder, “What about Technical Analysis?”
Bitcoin vs Technical Analysis
Well speaking from a trading point of view of price and volume only, there’s not much resistance to higher prices now that we’ve broken $800 USD. That was a significant psychological barrier for bitcoin.
Bitcoin has only traded above $800 for 22 days. Now that we’ve breached that barrier, there’s no much resistance to bring us to new all-time highs.
There’s also a thinning of volume now that prices are rising (chart attached). What this means is that many of the large holders of bitcoin – miners, funds, wealthy bitcoin investors, are holding.
These “whales” expect prices to be much higher, so they are not selling for current prices.
So can bitcoin sustain higher prices?
Answer: Hell yes.
Do you want to learn more about what bitcoin really is?
Check out this cool, informative video that SciShow released on youtube. It has nothing to do with investing or price; it just explains the value and benefits of bitcoin from a computer science POV