Bitcoin Rally 2020 is another flash in the night?

Crypto analysts are split on whether bitcoin’s rise this year is driven by unique factors or is just its latest bout of volatility. But many agree on one factor: an upcoming cut to the supply of bitcoin. Bitcoin has soared by almost half this year, to more than $10,000, for the first time since October. On Tuesday it hit its highest in five months. The cryptocurrency’s 11-year history is replete with fast ascents and equally rapid plunges. In late 2017, it rose three and a half times in just 35 days to reach almost $20,000. It then slumped 70% in seven weeks.

In the year after the two previous halvings, in November 2012 and July 2016, bitcoin rose around by 80 times and four times respectively. The exact proportion of the gains caused by the halving is unclear. But others doubt bitcoin’s latest rally is underpinned by anything more substantial than the previous booms. Major cryptocurrencies that tend to move in correlation with bitcoin have also gained this year. Ethereum has more than doubled; Ripple’s XRP token is up over 75%.

Also widely cited are expectations that cryptocurrencies will go mainstream, as central banks step up their research into digital currencies after Facebook’s push to offer its Libra coin. Some, such as China’s, are getting closer to issuing their own coins. And in comments that traders said stoked buying in bitcoin, U.S. Federal Reserve Chairman Jerome Powell told U.S. lawmakers on Tuesday that the Fed was “working hard” on the issue, while it remained undecided on any digital dollar.