The recent run up in Bitcoin has been nothing short of crazy. I mean it’s doubled since the first part of November! I’m not going to pretend I know for certain why it has run up so quickly but I have to imagine increased institutional interest along with Square’s and Paypal’s announcements last month have meaningfully contributed to the run up. This is on top of the usual argument for Bitcoin: ongoing debasement of fiat currencies. I’m sure a Democrat winning the White House has added a little more fuel to that fire. I wish I could say this makes sense or it doesn’t make sense but I’m not sure anyone can. For now, the trend is up and to the right and doesn’t look like it’s going to be slowing down much.
Different this time?
I hate to say it but I think the run up this time is different than the big run up three years ago. There isn’t as much hype in the general public. I say this anecdotally and referring to a Visual Capitalist tweet from last month showing the number of Google searches is a quarter of what they were three years ago. Additionally, there are substantially bigger players getting involved as well including Square, Paypal and institutional investors. Now, I’ve had some random people ask be about Bitcoin but it doesn’t seem to be as popular of a conversation starter as it was three years ago. Of course, that could have something to do with lockdowns and social distancing.
I don’t know what the endgame is but there is a ton of momentum, suggesting a continued climb higher. Additionally, there’s a favorable institutional mindset change towards digital currencies in general. There’s also a narrative in place that the monetary system is undergoing a change that it needs given the high levels of debt and other limitations of fiat currencies. In other words, the monetary system is evolving. Digital currencies appear to be at the forefront of that change. China recently launched its own digital currency and other nations are sure to follow. Whether Bitcoin is the big winner in all of this remains to be seen. I’m having a hard time visualizing how it is since governments aren’t likely going to let go of control over the monetary system. Maybe I need a bigger imagination though.