Bart Smith, who is the head of digital assets at Susquehanna, appeared on CNBC’s Squawk Box on Thursday, and he was asked to explain the sudden rise in the bitcoin price over the past month.
It should be noted that Adamant Capital released a report that stated it was a good time to buy bitcoin again and Delphi Digital released a report that indicated “the bottom is in” right before this most recent price run-up.
“There’s a lot of drivers to the price of bitcoin,” said Smith during his Squawk Box appearance. “There’s geopolitical drivers, there’s technological, [and] there’s regulatory to go with investor demand. So, it’s hard to isolate any one factor.”
Having said that, Smith explained three key commons themes found among those who have been bullish on bitcoin over the past month or so during the interview.
1. China and U.S. Trade War
The first factor brought up by Smith was the ongoing trade war between China and the United States.
“The net effect of the trade war with China and the U.S. is that the [Chinese] yuan is hitting a six-month low,” said Smith. “Much of the rise in bitcoin in 2017 came out of Asia — countries like Korea and China that have capital controls and, in many people’s minds, [devalue their currencies]. And therefore, bitcoin was either a hedge or just an outright way to get capital outside of that country.”
To Smith’s point, bitcoin traded at much higher prices on Korean exchanges during 2017 due to the financial restrictions that made it difficult to take advantage of arbitrage opportunities based on price differences found on exchanges in other countries. This higher bitcoin price on Korean exchanges eventually became known as the “kimchi premium”.
2. Consensus 2019
The second factor brought up by Smith had to do with the recent Consensus conference in New York City.
“There was a Bitcoin conference in New York called Consensus,” said Smith. “It’s a very large conference, and I think going into that weekend, the price went from $6,000 to $8,000.”
Smith added that a key area of excitement during the conference was upcoming launches of regulated digital asset platforms like the NYSE-associated Bakkt, Fidelity Digital Assets, and ErisX finally coming to market.
Another announcement that received a lot of attention around the time of the Consensus conference was the “acceptance” of bitcoin and other cryptocurrencies by Starbucks and Whole Foods. However, the way in which this payment solution was implemented turned off many bitcoin users.
3. Brokerages Offering Bitcoin to Retails Customers in 2019
According to Smith, the third factor behind the recent rise in the bitcoin price is perhaps the most important.
“Really, the big one is that there is a tremendous amount of optimism about U.S. brokerages, particularly online brokerages, offering bitcoin to retail customers in 2019,” said Smith. “While no one has come out and said that openly, there’s a lot of talk about that, and I think people are buying bitcoin ahead potentially of that new investor demand.”
In April, an individual who asked to remain anonymous told Bloomberg E*Trade will allow their customers to trade bitcoin and ether.
Smith was asked to take the pro-bitcoin side of a few questions during appearance on Squawk Box, but he clarified that he doesn’t have a dog in this race.
“I’m not a bitcoin evangelist, so it’s not my job to convert the unconverted,” said Smith. “And I’m not necessarily rooting for anything. I’m a market maker. I provide liquidity . . . I’m not making a price prognostication. I’m simply pointing out there’s a lot of optimism from people within the bitcoin community over things that have happened in recent months, and I think that’s reflected in the price.”
Smith added that those who think bitcoin doesn’t have any value are free to short the digital asset.
While bitcoin has been booming lately, it’s important to remember that there’s still plenty of work for developers and users to do in the areas of decentralization and privacy.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.