At the end of March, after the Bitcoin price had rallied by 25% from its mid-December low, I declared a new Bitcoin bull market was in progress, and the value of the cryptocurrency could rise even further as investors returned to the asset.
Even though only three weeks have passed since I made this statement, any traders who then decided to get in on the action have been well rewarded.
The price of Bitcoin has only increased since my last article was published and, at the time of writing, is changing hands for around $5,100. That is up approximately $1,100, or 30% in just a few weeks.
So, looking at this action and considering how the price of Bitcoin has moved since December last year, it’s clear the crypto asset is making a comeback. The big question now is, can this rally last, or will it run out of steam?
Shaky foundations
It’s always tricky to try and tell what the outlook is for the price of an asset because the future is so uncertain. This is particularly true for cryptocurrencies. The market is still so underdeveloped and these speculative assets don’t produce cash flows, so it’s complicated to work out how much they are worth individually.
What we do know is that interest in Bitcoin is picking back up again because the price of the cryptocurrency is determined by demand. Just like with any stock, when there are more buyers than sellers in the market, prices will increase. Bitcoin transaction data confirms this.
More interestÂ
According to Blockchain.com, the number of Bitcoin transactions has more than doubled over the past 12 months. This time last year, when the price of Bitcoin was coming down from its all-time high, the number of daily confirmed transactions dropped to 150,000.
However, back in February, the number of daily confirmed transactions spiked above 300,000 and has continued rising ever since. The most recent data suggest more than 350,000 transactions per day are being carried out. If this trend continues, then I think it’s reasonable to say the Bitcoin price will continue to rise as more market participants buy into the cryptocurrency.
Further, transaction data suggest that this rally in the Bitcoin price might be more sustainable than it has been in the past. The all-time high number of daily confirmed transactions is around 405,000, a record printed at the end of 2017 when each unit of the cryptocurrency was valued at more than $15,000.
This high price, coupled with the volatility that came with it, undoubtedly scared off many potential uses. Since then, the price has stabilised and, at only $5,100 a piece, it’s now cheaper to transact in Bitcoin. This seems to suggest we could see the number of daily transactions break a new high in the near term.
Overall, the fact that more people are using Bitcoin implies the price might rise further from current levels.