The reasons behind the increase in the price of bitcoin
The reasons behind the increase in the price of bitcoin
Bitcoin

The reasons behind the increase in the price of bitcoin

By Marco Cavicchioli - 2 Nov 2020

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In the last 20 days, the price of bitcoin has increased by about 30%

Indeed, it has reached peaks that had not been seen since January 2018, i.e. since the bursting of the speculative bubble at the end of 2017. 

In fact, already in the middle of last year, when Facebook announced the Libra project, the price exceeded $13,000, but it did so for a very short time, without being able to reach $14,000. 

So what’s different now compared to then? 

The main difference most likely is the May 2020 halving, which has actually reduced the BTC which are introduced in the market with every block. 

It is worth noting that bitcoin mining has very high costs that very often have to be paid in fiat currency. This means that a large proportion of the new BTC collected through mining has to be sold relatively quickly in order to finance mining. 

In addition, after the miners’ reward was halved, the hashrate paradoxically increased over the course of the months, increasing the costs of mining itself. 

In May, in conjunction with the halving, it had reached a new record, only to fall back and rise again, setting an even higher record in mid-October. 

However, since the BTC mined are half as many as at the beginning of the year, the market offer since May has probably been declining in the medium term. 

The price growth of Bitcoin in October 2020

But why did the most significant increase take place from October 8th? 

In fact, throughout 2020 it had fluctuated more or less around $10,000, with a peak at over $12,000 in August, but only in October, it broke through the $13,000 wall. 

Almost certainly the main triggering event was the announcement of PayPal. Despite the fact that it had already been hypothesized in June, and despite the fact that the price had already risen above $11,000 even before the final announcement, the push towards $13,000 most likely came from there. But there are also other events behind that +30% over 20 days. 

The continuous purchase of bitcoin on the market by listed companies such as MicroStrategy, which use it as a store of value, undoubtedly also played a role. 

It has to be said, however, that this is a phenomenon that began in August when BTC’s price first tried to break through the $13,000 wall without succeeding. 

According to some, the rise in the last few weeks may have been affected by the upcoming US presidential election, although there are different views on how this may have played a role. 

However, there may also be some temporary inverse correlation with the US stock markets, and in particular the Nasdaq index, which has been falling on average since October 12th. From this point of view, no evidence has yet emerged that would make it clear and precise which inverse correlation it could be. 

What is certain, however, is that during the second half of 2020 in particular, more and more financial institutions, including banks, seem to be no longer hostile towards Bitcoin, taking it ever more seriously. 

At a time of less BTC introduced on the market, due to halving, this may have prevented a drop in demand of the same magnitude.

 

Marco Cavicchioli

Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".

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