Bitcoin Price Hits All-Time-High Amid Speculative Surge, Liquidity Squeeze

Bitcoin’s price has soared to repeated all-time highs over the past few days, rising above $ 1,300 late on Friday, then $ 1,400 on Monday, and even $ 1,500 on one major exchange, amid s a surge of speculative investment across the cryptocurrency sector, and as some exchanges are having trouble processing fiat-based transactions.

Bitcoin has been struggling with a seemingly intractable internecine debate over network scaling, while similar projects have been drawing talent and investment dollars. But the price in 2017 has been generally rising, and rising sharply, amid a confluence of factors. Not all of the factors, ultimately, may turn out to be positive.

At $ 1,400, bitcoin would be up 44% year to date, according to the Bitcoin Price Index published by research site CoinDesk, and has never traded above $ 1,300, $ 1,400, or $ 1,500 before Friday. Depending upon which exchange you’re on, it crossed all those thresholds within the last three days. On the Hong Kong-based exchange Bitfinex, the second-largest cryptocurrency exchange, the price rose as high as $ 1,548. On CoinDesk, the price crossed $ 1,400 on Monday, and traded as high as $ 1,422.

“The space is definitely seeing more traction,” Charles Hayter, CEO of research site CryptoCompare. He noted also, though, that a “mixed bag of reasons” was behind the weekend surge. One reason is a surge of investing across cryptocurrencies. Another are withdrawal problems plaguing specific exchanges, with liquidity drying up and supply-and-demand factors forcing the price higher.

Bitcoin, ethereum, ripple, and other established cryptocurrencies have been rising recently amid a new trend – called the initial coin offering, or ICO –  that has been growing in the sector. In an ICO, a startup issues its own bitcoin-like asset, either as a straight-ahead investment or as a token for use with a service or product offering. There have been dozens of new coins minted and offered for sale.

Ethereum, the leading bitcoin alternative, traded as high as $ 80 on Monday, up from under $ 20 in the beginning of March. Even an alternative version of Ethereum called Ethereum Classic has been rising. On March 1, it traded at $ 1.29. On Monday, it was trading at $ 6.59. Ethereum has a more direct connection to the ICO trend than bitcoin, since many of the firms issuing these new coins are building products and services on the Ethereum network.

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Meanwhile, some of bitcoin’s gains are plain old supply and demand. Bitfinex and some other crypto exchanges in the industry have been dealing with liquidity and withdrawal issues the past few weeks. Bitfinex had trouble processing transactions after the Taiwanese banks that handle them started blocking requests. That’s part of a trend where some banks are pulling out of sectors they deem risky.

A representative from Bitfinex confirmed that the inability of investors to withdraw bitcoin is affecting the price. The liquidity squeeze is forcing traders to offer higher bids to get their bitcoin out, which is subsequently forcing the price up.

“This is not healthy,” said Vinny Lingham, CEO of bitcoin-based startup Civic and a high-profile trader.

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