With a 91% year-to-date gain on the books as of Wednesday, Bitcoin has emphatically shown this year that rumors of its death are widely exaggerated. But the factors behind the gains show why the cryptocurrency remains a highly speculative play, albeit one with a big potential payoff.
After trading as low as $358 early in the year, Bitcoin more than doubled over the next five months, with a big portion of the gains coming through a parabolic rise occurring between late May and mid-June. Bitcoin retreated over the following six weeks, but has been steadily rallying since, and on Wednesday topped $800 for the first time since February 2014. It now trades at $823.
The gains have been attributed to several different factors. The Brexit vote -- both in terms of the financial volatility it caused for the U.K., and the fears it induced about the Eurozone's stability -- certainly ranks high on the list. That said, it's worth keeping in mind that Bitcoin's giant mid-year surge happened before the June 23 Brexit vote (admittedly amid rising fears of a "Leave" vote) rather than after it.
Donald Trump's election, and the fears it stoked about a Trump administration potentially pursuing destabilizing economic and fiscal policies, is also considered a factor. Bitcoin is up 16% since Nov. 8, though as with Brexit, some Trump-related Bitcoin buying appears to have happened before the election.
Then there's India's decision last month to remove all 500 and 1,000 rupee notes out of circulation in an attempt to crack down on "black money." Local Bitcoin purchases have surged since the move, and have often involved sizable premiums to standard market prices. And more recently, Bitcoin demand in neighboring Pakistan has jumped after the country's Senate recommended banning its 5,000-rupee note.
It's also hard to overlook the role Chinese Bitcoin buying has played, as locals worried about government capital controls and anti-corruption efforts use Bitcoin as a vehicle to move money out of the country. And with Bitcoin having a long history of witnessing big price swings, speculators betting one or more of the aforementioned trends will propel Bitcoin even higher appear to have jump in.