Bitcoin went to $ 20,000 in 2017 and topped the mark in 2020. What prompted the rallies, and what happened in the days following the peaks, shows how much the market has changed in three years .
The digital currency, which has more than tripled its price this year, reached its first record of the year 24 days ago and has continued to climb, trading as high as $ 24,273 on Sunday. On Wednesday, it closed at $ 23,299. At previous rallies, such gains have quickly reversed course.
Bitcoin bulls say the money that fuels this year’s rally comes from more reliable sources than past rallies. Since September, major new investors together have bought about half a million bitcoins, worth about $ 11.5 billion, according to analytics firm Chainalysis, which tracked investors’ holdings with at least 1,000 bitcoins in wallets who is less than one year old.
Notable buyers this year include billionaire investors Paul Tudor Jones and Stanley Druckenmiller, and companies like Square Inc., Inc.
and Massachusetts Mutual Life Insurance Co.
There are more smaller buyers as well. There have been more than 38 million transfers this year from less than $ 1,000 of bitcoin to personal wallets, according to Chainalysis. That’s almost double the 20 million in 2017.
“This bull run feels very different,” said Pascal Gauthier, chief executive of cryptocurrency hardware manufacturer Ledger. “2017 was a crazy retail bull run. This time it’s serious. ”
In 2017, the digital currency opened in December at $ 10,542. Just 18 days later, it hit an intraday peak of $ 19,783.
Yet bitcoin closed above the $ 19,000 level only once and exceeded the $ 18,000 level only three times. Twenty-four days after reaching its record – compared to the current rally – bitcoin was down 29% and fell as much as 38%. Thirty-one days after the climax, it traded below $ 10,000, off almost 50% from the highest. He would spend the next two years undone.
“The bubble burst,” said Meltem Demirors, chief strategy officer at London-based asset management firm CoinShares. “Everyone started to write bitcoin obituaries again.”
Bitcoin supporters hope the industry has grown enough to handle its new fortunes.
The cryptocurrency was designed to act as a digital version of cash that would be beyond the control of governments or banks. Its software runs on a network of connected but independent computers. Anyone can download and run the program and become part of the network, but no party has control to make unilateral changes.
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That decentralized structure makes bitcoin an attractive asset to people looking to move money quickly and cheaply across borders, shield assets from government oversight, or hold an asset that is not depreciated to a dollar value the US.
Because it’s a relatively new idea – it was unveiled in October 2008 – bitcoin has gone through regular periods where a new crop of investors are finding it and getting excited about it. In the past, that has overwhelmed market infrastructure, such as when the Mt. Gox collapsed in 2014.
The rallies triggered regulatory rebates and eased enthusiasm, such as when the Securities and Exchange Commission lowered initial coin offerings in 2017. That year’s rally was driven in part by an investment boom for those offerings: startups and projects that created and sold their own digital money as a source of funding.
ICOs raised more than $ 4 billion in 2017, before the craze flared out. Most projects were poorly designed, poorly designed or outright fraud. Regulators cracked down. Only a handful survived.
There is more regulatory clarity this year. Many agencies, including the SEC and the Internal Revenue Service, have standardized rules regarding cryptocurrencies.
Still, a proposed new rule was opposed by the Treasury Department on Friday that would force some crypto traders to provide information about their identities not only from the bitcoin industry, but even from some members of Congress.
While increasingly bold price predictions are proliferating, canny intruders are wary of bitcoin’s regular tide and say its notoriously bad volatility has disappeared. After hitting the December 1 high, the price dropped by as much as 12% before rebounding.
“We haven’t gone into a bullish cycle or see a bear,” said Mati Greenspan, founder of research firm Quantum Economics. “That’s not how markets work.”
Write to Paul Vigna at [email protected]
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