Bitcoin price approaches 3-year high on stimulus talk, Paypal use
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The bitcoin price broke through $US13,500 ($19,000) in the past week in a sustained rally that pushed the world’s most popular cryptocurrency to its highest value for the year to date.
The world’s most traded cryptocurrency surged to $US13,550 ($19,280) this morning, boosted by US digital payment platform PayPal deciding to allow its users to pay for goods and services in cryptocurrencies, said analysts at trading platform eToro.
Paypal president and chief executive Dan Schulman said: “The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly.
eToro cryptocurrency analyst, Simon Peters, said this move would “introduce a massive user base to crypto, with PayPal boasting 346 million active accounts, all of whom will be able to hold and shop using Bitcoin, Ethereum and Litecoin once the service has been rolled out”.
Another tailwind for Bitcoin and other cryptocurrencies is continued talk about the US Congress passing a $US2 trillion package of measures to revive the flagging US economy.
The package has been the focus of negotiations for weeks between Republican US president Donald Trump and the Democrat-led House of Representatives and is unlikely to pass before Election Day on November 3.
Peters said irrespective of who wins next week’s US presidential election, president Donald Trump or former vice-president Joe Biden, both candidates will implement more spending and issuance of US dollars.
“If the Fed will be funding this by adding US Treasuries to its balance sheets, then this would surely reinforce the argument for Bitcoin as an alternative currency,” he said.
Bitcoin was designed by its legendary founder Satoshi Nakamoto to have a finite number – 21 million coins – to guard against inflation which is a feature of fiat currencies.
In another development favourable to cryptocurrencies, US Federal Reserve chairman Jerome Powell said a US central bank digital currency continues to be on the bank’s radar.
Institutional investors are showing increased interest in cryptocurrencies, as are some listed companies who are looking to add Bitcoin to their balance sheets, said eToro.
In a week when US equity markets lost ground, cryptocurrencies led by Bitcoin have made steady progress.
“It [Bitcoin] approached and the subsequently smashed through the much-feted $US12,000 mark with such momentum, there is every chance the crypto-asset could just push right on through to $US14,000,” said Peters.
Open interest long positions for Bitcoin on futures markets have increased this week, and short selling positions are unwinding, he said.
“The combination of strong fundamentals and positive news for the crypto-asset are providing the rocket-fuel for Bitcoin’s blast-off,” Peters added.
Were the Bitcoin price to surpass $US14,000, then its next staging post from a technical standpoint is $US20,000, said eToro technical analyst, David Derhy.
Bitcoin nearly reached $US20,000 in December 2017, but stopped just short of this magic level at around $US19,000.
“With the US election coming up next month, further economic stimulus from the US government is going to happen even if the size of that stimulus is still up for discussion,” he said.
An interesting recent development is Bitcoin’s de-coupling from US equity markets.
The two asset classes have typically moved in the same direction, but this is starting to change.
“It [Bitcoin] has enjoyed its longest run of decorrelation with the S&P 500 over the past couple of weeks,” said Peters.
The S&P 500 index slumped 3.5 per cent Wednesday to close at 3,271 points.