The Reasons Behind Bitcoin’s Continued Rise

A couple of weeks ago, I made the point that a common sense reading of the chart for Bitcoin against the U.S. Dollar (BTC/USD) pointed to a controlled, sustainable bull run. That bullish look has been given a boost since then, as the currency pair has pushed up to revisit the highs from the end of last year at around $465, a break of which would make the psychologically important $500 level the next target. Even more significant than the technical confirmation of the upward trend, however, is that the most recent jump in Bitcoin’s price has been driven by real, fundamental progress.

Two factors seem to have contributed to the bullish tone of BTC/USD trading over the last week or so, and both point to the long term viability of Bitcoin as an actual currency rather than as a trading instrument. Neither was news as such, as in both cases rumors had indicated the event was likely, but confirmation of the two positive stories justified and intensified the long term bullish outlook for Bitcoin

Firstly, we learned this week that exchange company Bitstamp had been granted a license in Luxembourg to operate as a payment institution. That may not appear to be huge news to some people as Luxembourg has a population of only just over half a million people, but the country’s status as an EU member gives the license significance beyond that country’s borders.

Under EU law, a financial services company licensed in one country is allowed to operate in all other member countries, so, in theory at least, this give Bitstamp a license to operate throughout Europe.

I say “in theory” because acceptance by the other E.U. member countries is not guaranteed under the so called “Passport Law.” Each country has the right to do its own due diligence before extending the license and, as some people have pointed out, that creates a possible loophole.

Other European countries have taken a less receptive view of Bitcoin and digital currency in general in the past, so may wish to block Bitstamp’s progress.

Even given that proviso, though, the fact that Europe now has an officially licensed exchange shows how far Bitcoin has come. It was only a short while ago that it was seen just as mainly a facilitator of criminal and even terrorist activity. The fact that a state, even one as small as Luxembourg, can see beyond that to the currency’s potential is an encouraging sign.

Even more encouraging in many ways was the other news, that the Japanese government had devised a set of bills that would effectively recognize Bitcoin as a currency and put some regulations in place. I have long argued here at that, as much as government regulation is anathema to many of the more libertarian minded Bitcoin enthusiasts there is a degree of inevitability about it if the currency is to become established.

The nature of such regulations can be addressed later, but without recognition of its basic function as a means of exchange, Bitcoin would be doomed.

That, then, is the real significance of these two news items when taken together. In two separate cases on different sides of the world, governments have accepted the role of Bitcoin as an actual currency. There may yet be problems with extending Bitstamp’s presence throughout the E.U., and the finished regulatory package in Japan may not be to the taste of every Bitcoin user, but the principle has been established. That makes real global acceptance of what was designed to be a global currency all the more likely, and it is that that the market is reacting to.

mm – leading Bitcoin News source since 2012

Virtual currency is not legal tender, is not backed by the government, and accounts and value balances are not subject to consumer protections. The information does not constitute investment advice or an offer to invest.