Those who remained Bitcoin believers when the cryptocurrency's value tumbled below $300 in 2015 and remained there for months can take a well-deserved victory lap. With prices having surged above $1,500 this week and the total value of all Bitcoins in existence now around $25 billion, the post-mortems that were written for it in 2015 and early 2016 are starting to look pretty dated.
But in one narrow respect, the post-mortems were correct: Bitcoin has largely failed as a mode of payment for consumer transactions, with many of the retailers that embraced it a few years ago having backtracked and the rest (from all signs) mostly seeing limited Bitcoin transaction volumes. What the predictions of Bitcoin's death didn't foresee, however, was the degree to which it would be embraced as an alternative to precious metals as a safe haven for those worried about things like inflation, political instability and (in certain countries) the security of assets held in traditional currencies.
At the same time, the massive gains seen in recent months, and especially the 40% gain seen over the last month, don't feel as if they're merely the product of buyers making thoughtful, calculated, decisions to embrace Bitcoin as a safe haven. Like Bitcoin's temporary surge above $1,000 in late 2013, there seems to be a strong speculative element at work.
As was the case for prior run-ups, a variety of explanations have been thrown around to explain Bitcoin's surge. Many have pointed to growing demand from Japanese investors, after Tokyo gave legal recognition to Bitcoin and announced cryptocurrency purchases won't be subject to a consumption tax starting in July. But that, of course, means purchases are still taxed for now, which one would think might keep a lid on near-term local demand.
ETF hopes have been mentioned as another factor. The SEC recently said it would reconsider a decision to reject the Winklevoss twins' planned Bitcoin ETF, and a firm called Grayscale Investments is pushing ahead with plans for a Bitcoin ETF that now features a $1 billion maximum initial offering size. The hope here is that the arrival of ETFs will expand Bitcoin's investor base. However, it's not all that hard for investors large and small to buy Bitcoins today via wallet services such as Coinbase and Xapo.
But in one narrow respect, the post-mortems were correct: Bitcoin has largely failed as a mode of payment for consumer transactions, with many of the retailers that embraced it a few years ago having backtracked and the rest (from all signs) mostly seeing limited Bitcoin transaction volumes. What the predictions of Bitcoin's death didn't foresee, however, was the degree to which it would be embraced as an alternative to precious metals as a safe haven for those worried about things like inflation, political instability and (in certain countries) the security of assets held in traditional currencies.
At the same time, the massive gains seen in recent months, and especially the 40% gain seen over the last month, don't feel as if they're merely the product of buyers making thoughtful, calculated, decisions to embrace Bitcoin as a safe haven. Like Bitcoin's temporary surge above $1,000 in late 2013, there seems to be a strong speculative element at work.
As was the case for prior run-ups, a variety of explanations have been thrown around to explain Bitcoin's surge. Many have pointed to growing demand from Japanese investors, after Tokyo gave legal recognition to Bitcoin and announced cryptocurrency purchases won't be subject to a consumption tax starting in July. But that, of course, means purchases are still taxed for now, which one would think might keep a lid on near-term local demand.
ETF hopes have been mentioned as another factor. The SEC recently said it would reconsider a decision to reject the Winklevoss twins' planned Bitcoin ETF, and a firm called Grayscale Investments is pushing ahead with plans for a Bitcoin ETF that now features a $1 billion maximum initial offering size. The hope here is that the arrival of ETFs will expand Bitcoin's investor base. However, it's not all that hard for investors large and small to buy Bitcoins today via wallet services such as Coinbase and Xapo.