Bitcoin Gone Wild


Bitcoin has had a tumultuous 2017, which has seen it make huge gains and also significant losses. Despite the volatility, on February 24 it surpassed the 2013 high of around $1165. On Friday, various exchanges had the currency was trading for as much as $1,206.60.

These exciting times for Bitcoin are being attributed to a wide range of factors. The most common assertion is the US Security and Exchange Commission's (SEC) upcoming decision over whether the first Bitcoin exchange-traded fund (ETF) will be approved. The Winklevoss Bitcoin Trust is headed by the renowned twins who lend their name to the fund. They are known for various tech entrepreneurship roles, including a feud over the creation of Facebook.

The SEC is set to make their decision on March 11. If the fund gets the green light, it is seen as a boon for the Bitcoin community, as it moves one step closer towards legitimizing the currency in the eyes of the US government.

Despite the surge in Bitcoin's value, not everyone is sure that the decision will be positive. Spencer Bogart, a Bitcoin analyst from Needham & Co, wrote the following message to clients, “To be clear, we don’t see any specific reason to disapprove the Winklevoss Bitcoin ETF but, instead, think that the confluence of fear, uncertainty, and doubt coupled with basic incentives at the SEC will make it very difficult to get approval.”

Uncertainty over the ETF is certainly not the only factor at play. Bloomberg has asserted that many investors are heading to the digital currency in a bid to hedge their bets against a potentially volatile market under the capricious Trump Presidency. Another theory, proposed by Techcrunch is that Bitcoin is performing well because it is now intimately tied to the stock market. As the market continues to surge, Bitcoin's value is rising along with it.

It would be unwise to discuss the current Bitcoin price boom without putting it in its appropriate context. Little more than a month ago, many pundits were expecting the price to soar above the 2013 high water mark, following a strong surge of interest from China. Despite 20% growth, fears of government intervention ended up causing the price to plummet 35%.

These booms and busts are familiar to any Bitcoin geek who is aware of the currency's instability. After slowly building in value since its 2009 launch, Bitcoin surged in 2013, reaching a peak of over $1000. The bubble burst and the price dropped steeply, before settling at around $250.

While the SEC decision is certainly a momentous point in Bitcoin's trajectory, at this stage it is hard to know what the result will be and how significantly it will affect the market. The only thing that we can know for sure, is that Bitcoin's price will continue to be volatile while its legality lies in such murky territory.