10 Hypotheses

The Crypto Spring is not just coming, it is in full bloom. Hopefully, by the time this article is finished, Bitcoin will still be on the rise (or at least high enough) and all hodlers and believers will still be celebrating the prosperity of the digital currency. The thing with BTC though, is that you can never be sure. The greatest mystery that haunts the minds of many crypto enthusiasts for years is whether someone or something can affect Bitcoin’s price.

In the big picture, it seems like nothing has changed: no new groundbreaking improvements have been implemented and the main issues are still there. And yet, the price is suddenly through the roof. It’s only fair to ask, is there a hidden strategy behind this performance?

Luckily, there’s no lack of theories and hypotheses on Bitcoin’s wayward attitude. What determines the bitcoin price? We’ve gathered the most curious and popular theories. The real question is, which one do you trust the most?

What affects the BTC price?

Consensus

One of the most unapparents theories regarding the current rise of Bitcoin’s price is the positive effect of the, then, upcoming Consensus conference in NYC. It was Thomas Lee who first mentioned on his Twitter that there must be a connection:

“Definitely think @coindesk #consensus2019 is a major factor (not only) for recent parabolic bitcoin move, especially considering higher overall quality of attendees at the largest crypto conference.”

In general, large crypto-related conferences and other important events are often considered to have some influence on the price charts.

US-China trade war

Now, this sounds a bit more substantial. The moment Donald Trump called on a trade war with China and hiked the tariffs to 25%, BTC’s price started to go up. At the first outset, these events seem rather random and not connected. But if you dig deeper, like Bloomberg’s reporter Ed van der Walt did, it all starts to make sense:

“Tariffs create geographic price arbitrages, which encourages smuggling, which drives money off-grid, which fuels bitcoin.”

Although we really hope though that smuggling is not a whole part of the deal. Moreover, it’s worth mentioning that stocks and oil reported losses, 10% on the average. This might be considered as a sign of Bitcoin’s durability. It also shows that the coin is independent of geopolitical and trade wars.

Major Retailers Accepting BTC

And then there was news about Starbucks, Nordstrom, and Amazon’s Whole Foods accepting BTC payments. Everyone got excited and started vigorously retweeting the news about mass adoption finally happening. This is, of course, a big step, and real-world implementation is a massive game-changer, but some skeptics believe the recent announcement from Starbucks and Co is very far from ideal. The payment process is not as smooth as everyone expects it to be. A Reddit user commented on this:

“It’s good, but it’s misleading […] It’s a step in the right direction but not quite full adoption/acceptance by Starbucks. We are still required to download their Spedn app and maybe KYC. The end goal is to be able to use any wallet app, their POS system will generate a payable QR that you just scan with your phone and pay. No need for a middleman like Flexa and no more pivoting in and out of fiat.”

But it’s not an article about mass adoption, it is about what affects the price of Bitcoin.

Now let’s step away from the recent events, and have a little look in the past.

Governments and Regulations

Whether we like it or not, governments are still the greatest manipulators of all time and even the crypto space is dancing to their tune. National authorities and their regulations are definitely among the factors affecting the bitcoin price. Let’s refresh our memory. One time, the Chinese government announced a ban on ICOs and cryptocurrency exchanges, and the BTC price crashed. And then they changed their mind and reopened the exchanges: the Bitcoin price increased again.

China’s neighbors and eternal rivals in Japan had a completely different approach, being crypto-friendly from the start. As soon as Japan’s government confirmed that Bitcoin was legal tender, the currency’s price went up to 2.8%.

On the other hand, not everyone shares this point of view. For instance, economist Kenneth Rogoff doubts the all-embracing power of world governments on crypto:

“Would the price of Bitcoin drop to zero if governments could perfectly observe transactions? Perhaps not. Even though Bitcoin transactions require an exorbitant amount of electricity, with some improvements, Bitcoin might still beat the 2% fees the big banks charge on credit and debit cards.”

Market Manipulation

Early investors or maybe even a bunch of lucky buyers or people with a secret motive share the stories of their magical profits on social media, a FOMO factor kicks in, and everyone rushes to buy. As a result, the price goes up. Then the story might have an alternative course of events. Once the price is up, professional traders, as well as the whales or a group of people who agreed on this in advance, sell the coin, which leads to a price crash. And there’s the pump and dump scheme at its finest for you.

Truth be told, there are all sorts of manipulations out there and there’s enough content for a whole new article. But there’s always one unifying element: all of these models are based on simple human greed.

Forks

We’ve already dedicated a couple of articles to last year’s BCH hard fork and shared our thoughts on whether it could really affect the price that much. When that infamous fork took place, the price of BTC suddenly crashed. And many experts, including Brian Kelly, the founder & CEO of BKCM, blamed the scandalous fork for that:

“After a real quiet period, with some of the lowest volatility in Bitcoin history, all of the sudden things exploded today. So what happened? Bitcoin Cash, which forked from Bitcoin last year, is doing a hard fork of their own.”

The thing is that forks are forcing everyone to leave their comfort zone and that may definitely cause some volatility.

Exchange Hacks

Every time a large exchange gets hacked, the BTC price goes down because of the global panic. That used to be the case. Until recently, when Binance got hacked and shortly after that, the price of BTC went up. Go figure.

Media

Oh, the almighty media! It can even compete with governments themselves. But what will it promote? Fake news, ‘crypto shaming’, and blaming digital currencies to work for terrorists and drug dealers, creating an unattractive image? Or maybe 20k BTC price predictions by the end of 2020?

And then there’s social media, which builds a FOMO-FUD cycle, forcing people to buy and sell according to somebody’s personal needs.

Or maybe one popular crypto-related website, not exactly media but a trusted source of information, forgets to include Korean trading prices in its statistics and reports wrong prices, and that will lead to panic sales.

Technological Changes

Bitcoin improvement proposals, SegWit, Lightning Network, as well as important steps in the development of blockchain technology in general can all have a positive effect on the Bitcoin price. There’s no hidden catch in this one because building is the key.

These days, Taproot protocol and Schnorr signatures are trending. The proposal will make the life of traders and regular users a little easier as it is going to reduce BTC block size, and lead to cheaper transaction prices and increase the level of anonymity.

Mining

And, finally, we shouldn’t forget about the miners and their saying. The solo-performance, at least for Bitcoin mining, is no longer reasonable, especially when the price is not as attractive as it used to be. So once again, it’s come down to big companies slash mining pools chasing their profit. In 2020, we’re expecting the next halving of mining reward and considering that the last two halving events caused a rise of the Bitcoin price, many expect the same from the third one.

The Bottom Line

So what influences the bitcoin price? Apart from the things we have mentioned above, there are so-called influencers, major exchanges, new projects we haven’t heard of yet, and all kinds of unpredictable events that may or may not influence the price of BTC, as well as other coins. Maybe a group of whales has grabbed the main Bitcoin fund all for themselves and its price volatility is just their wicked way of having fun. Who knows? Frankly speaking, nobody knows for sure, but everyone seems to have an opinion. One thing is certain: when there’s such sensitive thing as money is involved, much will depend on greed.

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