On Sunday evening, Aug. 22, the price of Bitcoin rose above $50,000 for the first time since May. It is a psychologically important round number, and it may help increase investor confidence in the matriarch of the cryptocurrency family.
The price didn’t stay above $50K for long. It was near $49.7K by 11 a.m. Monday. Still, by testing the psychological ceiling created by that number, bitcoin may have set the stage for a more lasting stay on the other side.
Bitcoin’s all-time peak came about in mid-April of this year, when its price exceeded $64,000. It was in a trading range between $50 and $64K between late February and mid May It got into that pricey neighborhood in February due to Tesla and Mastercard.
That was the month when Tesla both bought $1.5 billion in bitcoin and announced plans to accept bitcoins as payment for its vehicles. It was also the month when Mastercard opened up its network both to Bitcoin and to selected other cryptos.
Coinbase and Mining
There was something quite specific about the timing when Bitcoin hit its record in April. that was on the strength of Coinbase’ share filing with NASDAQ. Coinbase offers a range of products and services of use to crypto investors and traders, including notably a namesake app used to buy, store, or trade cryptos, a professional asset trading platform (Coinbase Pro) and a virtual wallet, allowing customers to access decentralized crypto apps (dapps) using a dapp browser.
Coinbase excitement was good for Bitcoin, but the excitement didn’t last long. Coinbase’s post-IPO high was $342, on April 16. It soon declined to a range between $220 and $250, and it has stayed there.
Likewise, the major cryptos have not been able to maintain their mid-April peak.
The following month saw a lot of publicity about a pressing environmental issue that the cryptos raise: the process of mining uses a lot of computing power, which requires electricity, which generally involves emissions. May also saw Tesla reverse itself on the issue of accepting Bitcoins.
On May 22, Bitcoin (BTC) was down to $37.5K. It slowly drifted lower from there. On July 20, it hit $29.8K.
It wasn’t merely the Tesla reversal that caused that decline. The U.S. Treasury and Federal Reserve “helped” by indicating their increasing about cryptos as a group in recent months. The Treasury sees the whole space as rife with tax evasion.
And there is the elephant in the cryptocurrency room: China. In early July, the central bank of the People’s Republic of China warned institutions not to provide any services for virtual currency transactions: not to lease business premises to firms in the field, or help their marketing, and provide the parties with software services. This announcement represented a new level of ferocity in a long-standing war.
Bitcoin Has Been Clawing Its Way Up
Yet, despite everything, late last month and through this month Bitcoin has been clawing its way upward again, to where it is now bumping up against $50K.
There is continued interest in the retail world. Only a week ago, for example, Walmart announced that it wants to hire someone to take its corporate lead in the field, an expert capable of identifying technological and customer trends. This interest may be related to Walmart’s recent creation of Hazel, its own fintech unit.
Also, there is some light at the end of the mining-emissions issue. Much of the crypto world is already transitioning away from proof-of-work systems to proof-of-stake, precisely because proof-of-stake does not make exorbitant demands of the electrical grid.
Among the major cryptos, Ether/Ethereum will go first into proof-of-stake. But if it transitions smoothly, Bitcoin will likely follow. This expectation may already be supporting the Bitcoin price climb back.