Bitcoin, the original and biggest cryptocurrency famous for its volatility is making waves again. In just 4 days it has gone up by $100 per bitcoin. Going from a closing value of $577.46 on June 8, 2016 to a $677.91 close on June 11, 2016 (source:bitcoinwisdom) Even reaching a $700 high today.
Furthermore, while the stock market has had a lackluster peformance this 2016, BTC seems to be posting pretty healthy returns for those who bought it at the beginning of the year. Starting at the Jan 1, 2016 price of ~$435, to June 2016 highs of $690+ makes for a shiny 50%-60% ROI (return on investment) for the first half of 2016.
To put that into perspective the popular Nasdaq composite index closed at 4,903 points on the first trading day of 2016, which was on January 4, 2016. Fast forward to the latest full trading day on June 10, 2016 and it closed at 4,894 points. This means that its return this 2016 up to June 10 is a disappointing -0.18%.
This is one of the reasons why some stock brokers have migrated to bitcoin in search for better performance, further increasing BTC’s current ballooned price. Experts and analysts of bitcoin cite that Chinese demand is the main reason behind this fast increment. They speculate investors in China are pumping up the price as they seek a store of value due to looming fears about the Chinese economy, and whose stock exchanges have fared even worse than the U.S. markets up till now.
Another optimistic metric for bitcoin is that its market capitalization has again surpassed $10B, meaning that volume and usage continues to grow despite being at a lower price than 2013’s all time high of $1,200 for every bitcoin.
At the current high price of $700 it is my opinion that we will see a retraction to previous levels in the low 600’s. It has been a strong bull run, but the laws of gravity come in to play now. What goes up must eventually come down. All the emotional trading done in China has pumped the price, now they will dump it.