Why Is the Bitcoin Price Rising to $2,000?

The rising Bitcoin price defies a simple explanation.

That's because a powerful combination of factors is driving the price of Bitcoin higher.

The Bitcoin price has jumped from just under $1,000 at the start of the year to nearly $2,000 today (Friday).

The catalysts driving this rally are so strong that they've overcome several issues that should be holding the Bitcoin price back, such as a long-running debate on how best to scale the network to accommodate the increasing number of transactions and the high-profile rejection of the Winklevoss Bitcoin ETF by the U.S. Securities and Exchange Commission in March.

The Bitcoin price gains since 2015 have made it the best-performing investment class in the world. After a 35% rise in 2015, the Bitcoin price increased 123% last year. And in less than five months in 2017, the Bitcoin price has doubled again.

Here's why Bitcoin has seemed unstoppable lately...

The Rising Bitcoin Price Explained

When I wrote about why the Bitcoin price was rising in January, I mentioned the halving of the block reward last July from 25 bitcoins to 12.5 bitcoins, among other things.

Earlier this month, as the price of Bitcoin broke through $1,500, I cited several new developments. It appears that at least these four are still exerting upward pressure on the price of Bitcoin:

• Japan: Bitcoin was made legal tender in Japan on April 1. Since then, interest in Bitcoin in that nation has soared. According to the digital currency tracking website Cryptocompare.com, yen-Bitcoin trades have risen to 46% of global volume.
• Russia: In mid-April, the Russian government reversed its stance on Bitcoin. Whereas last year the Russian Foreign Ministry was suggesting those using cryptocurrencies risked jail time, now the Kremlin is planning for full legalization.
• Other Cryptocurrencies: Bitcoin's offspring have enjoyed even bigger gains this year. The collective market value of all cryptocurrencies other than Bitcoin has rocketed 1,500% year to date, from $2.2 billion to $35.2 billion. That's helped boost the Bitcoin price because many cryptos can only be bought with Bitcoin.
• Institutional investors: Brian Kelly, founder of Brian Kelly Capital, told CNBC earlier this month that he was seeing institutional investors "take a keen interest in the entire sector" of cryptocurrency. Because Bitcoin is a relatively small market, big money can only enter the space in small, steady doses. That kind of steady demand in a market with tight supply keeps a floor under prices while driving them relentlessly higher.

But as the Bitcoin price has continued to surge in the weeks since, several additional catalysts have become apparent...

New Catalysts Helping Push the Price of Bitcoin Toward $2,000

One immediate cause for the rapid increase in the Bitcoin price over the past week is the same one that caused the stock markets to tank on Wednesday: the never-ending turmoil of the Trump administration.

Related: How to Buy Bitcoins - Your Guide to Digital Profits

The uncertainty over whether President Donald Trump will at some point be impeached, as well as how effectively he can govern with a rising number of dark clouds hanging over his administration, has made markets the world over nervous.

Add in the concerns over China's actions in the South China Sea as well as the bellicose behavior of North Korean dictator Kim Jong Un, and it's no wonder traders are moving into safe-haven investments such as gold, silver, and Bitcoin.

Another immediate catalyst has to do with Litecoin, one of Bitcoin's hundreds of cryptocurrency cousins. Litecoin this month successfully activated a change to its coding that allows its network to process more transactions per minute.

The change is very similar to one proposed by a segment of the Bitcoin community to partially solve the network scaling impasse. The successful implementation has given hope that Bitcoin will be able to do it, too. Plus, it showed the Litecoin network may be able to serve as way to test other proposed scaling solutions.

Beyond those immediate factors driving the Bitcoin price, a few longer-term catalysts have emerged...

Why the Bitcoin Price Will Keep Rising in 2017

David Zeiler

About the Author

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David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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