- Bitcoin spiked to more than $7,500 on Sunday, more than double its price in mid-December.
- Cryptocurrency enthusiasts on Reddit proposed several theories for the sudden rally.
- They highlighted the US-China trade war, institutional interest, exodus from alt coins, the Bitfinex scandal, and the Binance hack as possible reasons.
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Bitcoin spiked to more than $7,500 on Sunday — a sharp rise from its $5,000 level at the start of May, and more than double its price in mid-December. Analysts have struggled to identify one single catalyst.
“With no major news factors behind the aggressive appreciation, the sharp $1000 jump over the weekend remains a mystery to investors,” wrote Lukman Otunuga, Research Analyst at FXTM, in a research note.
However, crypto-fans have weighed in with competing theories on its sudden rise, which run the gamut from compelling to wildly far-fetched.
Here are five reasons for the rise, according to Reddit users:
1. Safe haven
“It’s possible that a great number of rich people know that the traditional markets are effed eight ways to Tuesday,” wrote diydude2 on the r/bitcoin thread’s daily discussion.
President Trump has sparked a global market sell-off after accusing China of walking back agreed provisions in a draft trade deal, hiking tariffs on $200 billion of Chinese goods, and preparing to expand tariffs to effectively all Chinese products in the next month if a trade agreement isn’t struck. Investors may have bought up Bitcoin to hedge their exposure to conventional assets.
2. Mainstream appeal
“Institutions are scrambling to get in ahead of the traditional brokerages’ launch (Fidelity, Ameritrade, Etrade) so they can dump on the next wave of retail investors to enter the space,” wrote Savage_X in the same discussion.
Fidelity, one of the world’s largest asset managers, will begin buying and selling bitcoin for its institutional customers in the next few weeks, according to Bloomberg. Online broker TD Ameritrade introduced trading of bitcoin futures in December, while securities brokerage E*Trade is preparing to enable cryptocurrency trading on its platform, Bloomberg wrote.
Rival institutions could be buying up bitcoin with the expectation that the entry of major players into the market could bolster the cryptocurrency’s credibility and drive mainstream purchases, pushing up its price.
3. Exodus from alt coins
“The ICO experiment is over,” wrote gonzales82 in a thread about the Bitcoin spike, referring to the recent boom in cryptocurrency launches known as initial coin offerings.
“People are waking up to the realization that bitcoin is a much larger idea than any of the blockchain phantasmagorias people have been trying to push for the last couple of years.”
There’s evidence to support the idea that investors are shifting funds from other cryptocurrencies to Bitcoin.
“From purely looking at the data — one factor that could be behind at least the BTC rally is the conversion of ‘alt’ coins into bitcoin,” Sid Shekhar, co-founder of Token Analyst, said in an interview with Business Insider. “For example, we have consistently been seeing a lot more BTC being transferred out of exchanges than going in.”
4. The Bitfinex scandal drove Bitcoin purchases
The Bitcoin rally could also be a product of the Bitfinex scandal. New York Attorney General Letitia James recently filed a lawsuit accusing the owner of the Bitfinex exchange of “ongoing fraud” and draining at least $700 million from the reserves backing its digital coin, Tether, to cover up $850 million in missing funds.
‘I think Bitcoin is going up because [of] the whole Bitfinex thing going on…I think they are having a lot of issues [fulfilling] withdrawal requests,” wrote sanderson22.
“I think a lot of people are buying Bitcoin [and] getting out of Tether, I think a crash will come if Bitfinex’s house of cards collapse[s] and they wound up losing a lot of people’s money.”
Other commenters voiced similar views.
“It seems to me as soon as the Tether/Bitfinex scandal started to come out the price went straight up,” wrote Swt23. “Could this not be from people that had a lot of the money stored in Tether [deciding] it might be safer to move out of Tether into Bitcoin.”
A wild theory suggests Bitfinex’s owners are driving up the price of Bitcoin to replenish the exchange’s cash reserves.
“Bitfinex is throwing everything they have at generating a new pump to attract whatever $USD influx they can get from FOMO’ing butters because they are otherwise completely cash insolvent,” wrote Poop_Shame.
5. The Binance hack proved Bitcoin’s integrity
After hackers stole $40 million of Bitcoin from Binance last week, the cryptocurrency exchange’s CEO, Changpeng Zhao, proposed a rollback of the blockchain to reverse the illicit transactions and recover the funds. The fierce backlash to his suggestion may have bolstered Bitcoin’s image as a legitimate currency and fueled demand for it.
“I think [Binance] might have helped Bitcoin a lot with their suggestion to rollback the chain,” wrote 2btc20000pizzas. “That notion was swiftly shut down by the community (users, devs, and miners) almost within a single day.”
Bitcoin advocates’ claims that the cryptocurrency is “censorship-resistant” and “scarce” became “more tangible when the very notion of tampering with the blockchain was shut down within hours,” the commenter added. “I really think for a lot of people, [this] might have just [shone] a light on why Bitcoin more than any other altcoin has value, and isn’t just stupid Internet money.”
Bitcoin was up 5% at $7,048 at the time of writing.