Bitcoin is at record highs again, surging through $8300 at the moment. In this article, we'll analyze a few reasons why the cryptocurrency is surging again and why investors may see a $10,000 price for the virtual currency.

Hedge Funds are interested in Bitcoin and blockchain technology

  • Former hedge fund manager, Mike Novogratz stated on Bloomberg T.V. Tuesday that he forecasts the price of Bitcoin to hit $10,000 by year-end. Why are Mr. Novogratz' comments important? The former Goldman Sachs alum is starting a $500 million cryptocurrency hedge fund.
  • Novogratz compares Bitcoin to gold, calling it digital gold in that “gold has value solely because people say it has value; bitcoin is built on an amazing technology, there’s a limited supply of it,” Novogratz stated in his Bloomberg television interview.

Bitcoin has risen over 160 percent since September and is up over 340 percent since July last year.

Institutional Investors are looking to get into the cryptocurrencies

  • Coinbase CEO, Brian Armstrong said on CNBC that "there are a hundred hedge funds created that are interested in Cryptocurrencies in the last year."
  • Armstrong went on to say that he believes there's over $10B of institutional investors' money waiting on the sidelines to be invested in cryptocurrencies like Bitcoin.

Banks and governments getting into the cryptocurrency game

  • Although banks are not necessarily interested in buying Bitcoin specifically, financial firms are interested in the blockchain technology that is behind Bitcoin and other cryptocurrencies. The technology enables businesses and banks to transfer money internationally without intermediary banks and reduce the current two to three turnaround time for payments to arrive.
  • Just recently according to Investopedia, the International Monetary Fund or IMF suggested: "that banks should consider Investing in cryptocurrencies more seriously than they have in the past."
  • When I worked in global banking for a top U.S. bank, I oversaw over $400 million per day in foreign currency payments and I can tell you it can be an antiquated process. Currently, if a business wants to transfer money to Germany for example, the U.S. bank must wire the money to a German bank (correspondent bank), where in turn, the German corresponding bank would transfer the funds to the final destination bank (or the local bank in Germany) to be ultimately credited to the account of the final beneficiary.
  • The advance of blockchain technology could lead to enormous savings for consumers in the form of wire fees and lower costs for banks since they would no longer need to pay corresponding network banks in foreign countries to affect payments.
  • Each bank takes out a fee during the payment process and the correspondent bank charges the U.S. bank for use of its branch network in the foreign country. Blockchain technology virtually eliminates this process whereby a business could transfer bitcoin to the final beneficiary without any banks involved.
  • Even governments have gotten into the cryptocurrency game. The Philippine government legalized Bitcoin earlier this year.

Takeaway

Undoubtedly, these massive flows of investment liquidity and interest in blockchain technology are likely to keep Bitcoin's price favored to the upside and at the very least help to limit substantial corrections in the short term.

Just recently, Bitcoin hit record levels again. However, any negative fundamental news about blockchain technology such as flash crashes or unforeseen technological problems could have the potential to push Bitcoin and other cryptocurrencies into correction territory.

As Mr. Novogratz stated to Bloomberg television, “We’re in the second or third inning.” As a result, there are likely to be both growing pains and enormous investment opportunities with cryptocurrencies in the coming months.
© ALL RIGHTS RESERVED