Wall Street Analyst Explains Why Bitcoin Is Back From The Dead And Surging To All-Time Highs
Overnight, Bitcoin hit a new all-time high of $270, surpassing the peak price of $266 seen at the height of the Bitcoin mania in April.
"Bitcoin is making a new high this week, breaking through the spiky bubble levels of April in a pretty controlled and orderly manner," writes ConvergEx Group chief market strategist Nick Colas in a note to clients this morning. "What gives?"
In the note, Colas touches offers a few points on Bitcoin's second wind:
The biggest Bitcoin exchange is now in China, displacing Japanese, American and European sources of demand. That enterprise is called BTC China, and its CEO Bobby Lee hails from Yahoo! and Walmart China. Oh, and he graduated from Stanford with a degree in Computer Science. In short, an apparently pretty clever fellow.
Our sources in the Bitcoin community also agree that Second Market, the New York-based business best known for trading pre-IPO company stock, has become a major player in demand for Bitcoin. Earlier this year they started the Bitcoin Investment Trust, an open-ended product to buy and hold Bitcoins. There’s no way to know how much Second Market has purchased on behalf of its clients, but it must be a popular offering – the banner ad on their site for the trust occupied the top third of their front page.
It’s not all been roses for Bitcoin, even in this recent run-up. Back in September computer science researchers from UC – San Diego showed that it was actually fairly easy to track individual transactions in the bitcoin transaction ledger. Just this week, academics at Cornell proposed that bitcoin could eventually be co-opted by a handful of "Miners" who could hijack the system.
Colas also chalks up part of the currency's resilience — why it's seemingly "minted on Teflon" — to its limited supply.
"In the 4-ish minutes it has taken you to read this far, the most new Bitcoins that might have been issued is 25, or $6,250," he writes. "In the same timeframe, the Federal Reserve has pushed another $7.8 million into the financial system with Quantitative Easing."