Bitcoin appears to be recovering from its massive price slump with back-to-back weekly price gains for the first time in 2018. The number one cryptocurrency had previously fallen from almost $20,000 in December 2018 to below $6,000 at the start of February 2018. Now, bitcoin appears to be on the march towards breaking the $10,000 milestone. The following are some of the reasons for the bitcoin price increase.
Despite the fact that Bitcoin is the number one cryptocurrency in the world, some of its operational protocols have been deemed inefficient. This is especially against the backdrop of the huge volume of transactions carried out on the blockchain. According to Fran Strajnar, the CEO of Brave New Coin, recent improvements brought about by the implementation of the Lightning Network protocol has helped to improve the usability of the blockchain. Despite not being fully implemented, the Lightning Network holds the promise of decreased network congestion which could even render altcoins obsolete.
SegWit is another protocol implementation that has helped to improve user sentiment with regard to Bitcoin. The Bitcoin scalability debate that had been something of a thorny issue in the Bitcoin community even took a drastic turn in 2017 when it led to the first Bitcoin hard fork. Bitcoin Cash was the result of the hard fork and the core Bitcoin network would subsequently accept SegWit (don’t forget to also check out our Bitcoin vs Bitcoin Cash guide). By implementing the SegWit upgrade on the Bitcoin network, more transactions can be processed per second. The effects of the SegWit upgrade are only being felt now because it has taken a while for its adoption to permeate the network. SegWit transactions have successfully outstripped that of Bitcoin Cash.
With the U.S. tax filing deadline day approaching in the middle of April 2018, many Bitcoin investors had to liquidate their holdings in order to pay crypto taxes. This also coincided with a period of regulatory crackdowns in many countries thus creating fear and uncertainty in the market. This led to massive selloffs which plunged the Bitcoin price as demand shrunk considerably. The U.S. tax season is over and the effect of regulations seemed to have cooled off. Investors appear to be a little more confident going into the market thus driving up demand and with it, prices.
The entry of institutional investors into the Bitcoin market has also served to increase the price of Bitcoin. In April, it was reported that the $26 billion-dollar Soros Fund was preparing to trade Bitcoin. George Soros isn’t the only big-name fund getting into the market as the Rockefeller family fund is also reported to be eyeing up a foray into the market. institutional investors contribute greatly to legitimizing Bitcoin as an asset class. According to Eiland Kowala, the CEO of the Kowala blockchain platform, the entry of big VC and hedge fund firms into the market is creating a different type of interest in the market.
Many regulatory bodies like the SEC are shining the spotlight on ICO tokens, trying to determine whether they are utilities or securities. Bitcoin doesn’t fall into any of those categories and as such, it isn’t affected by such attention. As a result of the uncertainty in the majority of the altcoin market, Bitcoin represents a safe bet for crypto investors.