Bitcoin reaches $700, experts give 5 major factors

Over the past two days of last weekend, the price of Bitcoin surged 20%, easily surpassing $700. This strong appreciation performance has caught the attention of many experts.

Market observers have offered various explanations for the upward trend, including ongoing uncertainty over Britain’s decision to leave the European Union, the growing interest in blockchain technology and the upcoming bitcoin reward halving.

It is possible that one or a combination of these factors is the reason why Bitcoin has reached the $700 mark. Here are the most common theories from experts on why Bitcoin's price has reached a new high:

Fear of 'Brexit'

More than one expert has highlighted the possibility of Britain’s exit from the European Union as a major driver of Bitcoin’s price increase.

Although many surveys have shown that the 'Remain in the EU' camp has more support than the 'Leave' camp, a recent poll found that 52% of respondents want the UK to leave the EU, while 33% want the UK to remain in the EU.

Arthur Hayes, co-founder and CEO of Bitcoin leveraged trading platform BitMEX, said:

“The number of people in favor of Brexit is at an all-time high.”

He also said there is precedent for Brexit driving up Bitcoin prices.

“We should remember the impact that the news that Greece will leave the European Union had on the price of Bitcoin. If the UK votes to leave the EU, it will be out of control. The uncertainty of whether the UK will leave the EU continues to rise, which has a positive impact on Bitcoin and other digital currencies.”

Miner rewards halved

Several market experts have pointed to the upcoming halving of the Bitcoin network’s rewards paid to miners, individuals or entities, as driving up the price of Bitcoin.

When the Bitcoin halving occurs sometime next month, the reward miners receive for each block they mine will drop from 25 BTC to 12.5 BTC. Agentic Group founder and managing director Rik Willard said the halving is "getting a lot of people excited." He compared the effect of the halving event to that of a "stock split."

Huobi co-founder Du Jun said that the halving of mining rewards will "break the previous balance of supply and demand". Therefore, this event is good news for all Bitcoin traders and investors. Although the halving has not yet occurred, it is already having an impact on the market.

The rise of blockchain

The growing interest in blockchain is having a positive impact on the Bitcoin public blockchain and its potential use cases.

Willard commented on this sentiment by highlighting what he sees as the increasing use of Bitcoin for commercial purposes. In particular, he mentioned that some companies are looking into using blockchain technology to manage digital copyrights.

Willard described blockchain as 'a potential business juggernaut' as it rapidly gains prominence and market players are leveraging the technology for commercial purposes.

Fiat currency influx and Bitcoin demand

Chris Burniske of Ark Investors highlighted that another factor contributing to the rise in Bitcoin prices is the influx of fiat currencies.

Bernisco said:

“One thing I find very interesting is that Ethereum has been relatively stable in the face of Bitcoin’s rise.”

He went on to say:

“I think we have a lot of new fiat currencies coming into Bitcoin, and the price trend of Bitcoin is not driven by people exchanging ether for ether, which has been shown before.”

Petar Zivkovski, head of operations at Whaleclub, said the current supply of Bitcoin is struggling to keep up with strong market demand.

Last weekend’s price leap ‘was not even related to strong buying power, liquidity in Bitcoin’s order book was even low’.

Overall, Zivkovski painted a more bearish picture for the market, with Bitcoin’s low liquidity being the main factor driving the price higher.

“There are so few orders to sell Bitcoin that there are so few buy orders to fill. So when buyers are overwhelmed, the price will go up, and if buy liquidity is low, the price will go higher.”

He also said:

“In this case, lower selling interest leads to a liquidity vacuum, and regular buyers (not big buyers) can drive prices higher.”

The China Question

While market observers have offered a number of explanations for last weekend’s bitcoin surge, some experts are pointing the finger at China as a major driving force behind the price increase.

Arthur Hayes, CEO of BitMEX, predicts that the Federal Reserve will not raise interest rates anytime soon, and as long as interest rates remain unchanged, "the People's Bank of China will slow or reverse some of the depreciation of the RMB."

Joe Lee, founder of derivatives trading platform Magnr, also attaches great importance to China and its impact on Bitcoin, and pointed out several factors that will further drive demand for digital currencies.

Lee said:

“Demand for Bitcoin in China remains strong and will continue to increase over time due to economic uncertainty.”

He also said:

“With the IMF signaling that the risk of Chinese corporate debt defaults continues to rise, capital flight will continue. The Chinese economy is changing rapidly, and debt-fueled growth can only last so long.”

In contrast, Lee believes that Bitcoin becomes "a natural hedge" for investors in the face of these concerns.