Is bitcoin making a comeback?
Oh, if we had a bitcoin for every time we've heard that question.
Actually, that would be pretty difficult to calculate how much we’d actually have in real dollars since its price trend is so volatile.
Every time bitcoin shoots above the $500 mark, the digital currency world starts buzzing about why bitcoin is here to stay and why it's going to shoot above the $600 mark soon. And every time, bitcoin's price dips back, and it gets denounced again.
For now, bitcoin is basking in its 21-month high price.
Now don't get us wrong, bitcoin is trending at more than double what it was on June 3 last year ($225.65), but getting to the $530 mark doesn't mean bitcoin has its groove back.
To be precise, $536.75 was bitcoin's price yesterday afternoon.
But details aside, let's not forget that this pales in comparison to bitcoin's prime-time price of $1,242 on Nov. 29, 2013. While that price was impressive, it's roughly two-and-a-half years ago and bitcoin's price hasn't come within an earshot of that since.
In fact, 2015's bitcoin prices ranged mainly from the low $200s to around the mid $400s. The year 2016 has been a bit brighter for bitcoin, as bitcoin's lowest price in 2016 was back on Jan. 16 at $358.77.
Talk about fluctuation. Can you imagine if the value of the U.S. dollar abroad spiked and dipped at this rapid of a rate?
Either way, bitcoin has the attention of the mainstream media in a positive light for once (mostly), but we had to break the news: Bitcoin hasn't quite hit its comeback.
And we're not holding our breath for the rest of 2016 to see if it will, in fact, be bitcoin's year.
As for what's driving up bitcoin's price? Here are a few theories:
China's Bitcoin Buying Spree
This buying spree began late last week and carried out for a few days.
The action was the result of Chinese investors pushing up the price of bitcoin by 21 percent in a four-day period. At the start of the week, bitcoin was looking it could hit the $550 mark. It didn't, of course, but that was the trajectory.
All in, bitcoin has added $1.2 billion to its market cap, according to data from blockchain.info.
The bitcoin burst comes as Chinese investors are looking for new and more productive asset classes. Similar booms have recently been observed in equities, bonds and commodities trading, all with an accompanying deflation once the roving gang of investors moves on to the next big thing.
The recent devaluation of the yuan has also motivated some Chinese consumers to seek bitcoin as a hedge against currency devaluation. Investors are also worried about the decreasing value of the yuan.
This is what bitcoin offers to those Chinese investors as strict regulations in their nation otherwise make it hard for Chinese nationals to move money cross-border. Hence why Beijing has worked to curb trading in bitcoin.
Now, however, two Chinese exchanges — Huobi and OKCoin — collectively account for some 92 percent of global trading in bitcoin.
What else is causing the bitcoin burst?
The price surge in bitcoin is also being pushed by a perceived coming drop in supply. Every four years, the algorithm that spits off bitcoin through “mining” halves the number of bitcoin it releases in an attempt to keep inflation from occurring.
Because bitcoin is "mined" by people by essentially solving cryptographic puzzles, it should be no surprise that there's a lot of mining going on that doesn't actually end up generating bitcoins. But eventually, out of fear of the limited supply, miners will only receive 12.5 bitcoins for solving the puzzle, instead of the previous 25. That's even half of what it was in 2012 when it was first cut to avoid inflation issues.
Multiple reports on the subject now suggest that the upcoming pressure on the mining supply is impacting the price of bitcoin (in a good way). For now, it's all speculation — as many things in the bitcoin ecosystem are — but we’ll probably know pretty soon what's actually going to happen next with bitcoin's major price surge (or drop).
Your guess is as good as ours.
But we'll be watching bitcoin’s price fluctuations closely, as always, to see what may be in store for the digital currency's future.