Bitcoin rally seems to be never ending. It has crossed USD 4200 on most global exchanges and is trading at INR 300,000 in India. This is an all time high. But what is driving the rally? Though we have covered most parts of this in our last few posts, I thought it will be good to lost the reasons at one place. So here are the top 5 reasons –
1. Wall Street is interested in Bitcoin
Stock markets have been correcting globally and several stock experts have been advocating investment into Bitcoins on news channels since a month now. These are mainstream channels and reach out to Millions if not Billions of investors. Fundstrat’s Tom Lee, one of the renowned financial markets expert, recently told CNBC that he expects bitcoin to be the best performing asset class through the end of this year. Bitcoin has already more than tripled in value this year with stories of Bitcoin Millionaires all around the web. This is enough to make more and more investors interested.
2. ICO Markets on a all time high
ICOs are a way for start-ups to raise money by selling investors tokens in exchange for equity, similar to an initial public offering (IPO). The amount of money raised by start-ups via so-called initial coin offerings (ICOs) has surpassed early stage venture capital (VC) funding for internet companies. ICOs have raised close to $1.2 billion which is greater than early stage VC funding. Most of the ICOs require investors to invest through Bitcoins. This is one of the reasons for the surge in demand of Bitcoins. (Read special post on this)
3. War Concerns
Concerns of a war between USA and North Korea, which could escalate further, have been on the rise. Financial markets are likely to take a significant hit in case of a war given the fact that valuations globally are being considered to be on the higher side and markets were anyways headed for a correction as per many experts. In times of war, Bitcoin could be seen as the safest way to store wealth by several investors. (Read our exclusive coverage on this)
4. Sluggish performance by other Assets
Gold prices have also been stagnant since a few months. Several investors have burned their hands with Crude Oil trades in the past. Real estate market also does not look like a very promising investment destination in most parts of the world. The obvious choice for investors is Bitcoin right now.
5. Demand from Asian countries
Most of the current demand for bitcoin is stemming from Japan, China, South Korea and India. Further some countries have already regulated Bitcoin in some manner which makes it an attractive investment for mainline investors. Europe has already seen launch of Bitcoin ATMs and this trend is likely to continue in Asian countries.
Recommendation – Bitcoin may seem to be north bound as of now, but any correction could see significant price reductions, given the high volatility nature of crypto markets. Extreme caution should be exercised by investors while investing into Bitcoins.