The price of Bitcoin has risen to US$17,800 ($25,707) this week thanks to validation from payments giant PayPal, the election of the first ever Bitcoin-supporting senator and a report claiming it will hit highs of US$381,000 per coin as soon as 2021.
The unexpected rally has seen the digital coin trade at its highest price in three years. It has climbed steeply in the last month, having traded below US$12,000 in mid October.
PayPal last week announced that it was increasing a limit on how much of the coin customers could buy because demand was so high. Allowing customers to trade, buy and hold Bitcoin, Litecoin and Ether is seen as a major validation for the industry after Bill Harris, PayPal's former chief executive, had described Bitcoin as "the greatest scam in history" in 2018.
PayPal said that it would launch its Bitcoin trading feature to 10 per cent of its users on October 29. On November 3, it said it would be increasing the limit a customer could trade from US$100,000 to double because of high demand. But it was after it announced a wider availability for customers in the US on November 12 that Bitcoin's price began to pick up.
The digital coin's price peaked in late 2017, reaching US$20,000 per coin, but plummeted the following year and entered into what experts describe as a "crypto winter". Even American investment giant Fidelity's announcement that it had set up a crypto arm to make it easier for its clients to trade digital coins in August barely moved the needle.
Gavin Brown, senior lecturer in financial technology at Liverpool University, says the "lower for longer" monetary policy being adopted by central banks across the world may be a factor. This means the hunt for yield is more difficult across typical assets.
Record levels of debt burden for both individuals and countries, coupled with the pandemic has pushed banks into quantitative easing - devaluing fiat currency.
"Bitcoin does not suffer from this as its supply is precoded," Brown says. "There are presently 19 million Bitcoins in existence with a maximum total supply once all Bitcoins have been created of 21 million - that's one Bitcoin for every 371 people on the planet. Such scarcity of supply becomes more appealing in the context of increasing rates of quantitative easing".
Another reason for the sharp spike may be down to an alleged leaked report that appeared on Twitter on November 13. The report, shared in screen grabs with the official Citibank header template, appeared to have been written by Tom Fitzpatrick, a former foreign currency technician and Citibank managing director.
In it Fitzpatrick claims that Bitcoin may peak at US$381,000 in 2021. The report compares gold and Bitcoin based on historical inflation and fiat devaluation. A Citibank spokesman was unavailable to confirm the authenticity of the report.
Meanwhile, the US election may have also played a part in the coin's surge. An incoming senator for Wyoming, Cynthia Lummis is the first senator to own Bitcoin. The Democrat bought the coin back in 2013 after a tip from her son-in-law. She is expected to advocate for cryptocurrency.
Sceptics' positions have yet to change, however. Ray Dalio, the founder of Bridgewater Associates, penned a Twitter thread denouncing its legitimacy as a long-standing alternative to currency.
"If it becomes successful enough to compete and be threatening enough to currencies that governments control, the governments will outlaw it and make it too dangerous to use," Dalio wrote.
After much criticism from cryptocurrency advocates, he was quick to point out that he would love to be corrected.
"I might be missing something," he said.
- Telegraph Media Group