It has been a year of highs for bitcoin and cryptocurrencies. After surpassing the $5,000 mark, bitcoin is poised to surpass $6,000 next. As of this writing, bitcoin is trading at $5,592.56. Cumulatively, it is up by 546% since the start of this year.
A bunch of cryptocurrencies, including ethereum and litecoin, have imitated bitcoin’s trajectory and racked up gains ranging from 4,000% to 1,325% respectively. Besides the inherent dynamics of cryptocurrencies (there is a limited number of them in the market), other factors are at work in raising their prices.
Here are two factors influencing bitcoin’s price right now.
Interest From Institutional Investors
A recent Bank of America report attributes the increased value of cryptocurrencies to interest by institutional investors. As financial services companies begin offering cryptocurrencies in custom products, Bank of America predicts that it could affect the “liquidity and market capitalization for such currencies.”
European institutions have taken the lead in designing new products using cryptocurrencies. For example, investors can track ethereum’s price using exchange-traded notes in Nasdaq’s Sweden exchange. Switzerland’s financial regulation authority has approved a product from Falcon Bank that enables its clients to trade in bitcoin. U.S. banks are following suit.
Goldman Sachs is said to be considering bitcoin trading while JP Morgan launched a payment network based on ethereum’s blockchain yesterday. These moves could translate into another price increase across the board.
Interest From Asia
South Korea and China may have clamped down on bitcoin, but that hasn’t tamped investor interest in the cryptocurrencies. (See also: After China, South Korea Bans ICOs). According to reports, investors in both countries are paying a premium to invest in bitcoin and cryptocurrencies. In fact, some bitcoin trades through China’s OKCoin exchange have already surpassed the $6,000 value.
South Korea’s regulation has resulted in limited numbers of cryptocurrencies and high demand. The result is that the Asian country has become the largest market for ethereum. Demand from Japan, which recognized bitcoin as legal tender earlier this year, could also drive up prices for cryptocurrencies. (See also: Bitcoin Gets Boost From Japan.)