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What is Behind Bitcoin’s Price Surge?

Bitcoin’s price has surged an astronomical 1,600% since the start of this year. If you had invested just $1,000, you would be sitting pretty on $16,000.

However, what has caused Bitcoin’s price to rally so much this year?

Japan accepts bitcoin as a legal currency

A major catalyst for this year’s sudden increase in demand for bitcoins is the growing acceptance of the cryptocurrency as a form of payment. This was emphasised by Japan’s move to legalise Bitcoin as a form of payment in April this year. Many well-recognised retailers in Japan like Bic Camera also started accepting Bitcoins as payment earlier in the year.

The growing acceptance of Bitcoin and its move into mainstream transactions have had a positive impact on the Bitcoin community and reinforced their belief of Bitcoin’s utility as a currency.

Chicago Board of Exchange (CBOE) launches Bitcoin future trading

The announcement that a major United States exchange was launching Bitcoin futures further fueled excitement within the Bitcoin community. This was considered a major victory for Bitcoin as it is the next step for Bitcoin’s move into the mainstream.

With the availability of Bitcoin futures, more people are able to jump on the bandwagon and can cause the price to increase further.

Besides CBOE, its competitor, Chicago Mercantile Exchange, is also set to launch its own Bitcoin futures trading next week.

These two events have been a key catalyst for recent Bitcoin price spikes.

Numerous new crypto-focused hedge funds launched

The sudden interest in cryptocurrency this year has caused investors and speculators to try to get in on the act. The launch of multiple crypto-focused hedge funds has allowed them to do just that as these funds invest their assets in a wide variety of cryptocurrencies, including Bitcoins. This has been a big part of the reason for the influx of funds moving into Bitcoins and other digital currencies.

As of now, most of these funds have managed an enormous return on their investment, but it remains to be seen what the long-term returns will be or if the crypto craze will eventually fade away.

The Foolish bottom line

Bitcoin’s value has surged in the past year. These are just three catalysts that have boosted investors’ interest. However, before you invest in Bitcoin, it is important to know that Bitcoin’s price is highly volatile and its true utility and value is unknown even to the most fervent Bitcoin supporter. It is important we each do sufficient research before investing in such a highly speculative asset.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.