Bitcoin has broken through the $15,000 mark, reaching a three year high. The surge comes at a time when Europe enters its second lockdown, the dollar continues to weaken and stock markets are rallying on the back of the US presidential election. Besides the unique macroeconomic and political backdrop, there are a couple of key drivers influencing Bitcoin’s rally:
1. Bitcoin as a hedge against inflation and QE
Several high-profile central banks including the Reserve Bank of Australia and Bank of England have announced drastic Quantitative easing (QE) plans to combat the economic threat of COVID-19. Whilst these measures seem prudent some investors are concerned this will lead to a significant rise in inflation. Typically gold has been seen as the defacto hedge against rising inflation but more and more bitcoin is turned to as a hedge against inflation.
2. Corporate Support of Bitcoin
One of the factors driving the bitcoin price is the additional corporate support for Bitcoin we have seen during the past three months from the likes of MicroStrategy and Square holding Bitcoin positions. And most importantly PayPal allowing its users to buy, sell and hold cryptocurrencies is in our view the most important news this year for the digital asset industry.