- The present Bitcoin run may be nothing more than a bear market rally, but what’s driving it feels bigger than before
- The 2019 ‘Xi pump’ bear market rally was a short term catalyst that worked at the time, but the current rally is founded on Bitcoin’s use case
- The concerns over the banking system are playing right into Bitcoin’s hands
Bitcoin’s rally from $15,500 to $28,000 (so far) may seem like an unusual and unexpected turn of events, but history tells us that it is anything but. Those who were around for the 2019 bear market rally will remember all too well how Bitcoin pulled off a similar feat, and while the fact that a narrative has once again ridden to Bitcoin’s rescue and brought its use case into sharp relief, this current rally might turn out to be more significant and long-lasting than the ‘Xi pump’ of 2019.
Xi Pump Was Happy Accident
The ‘Xi pump’ had its roots in a November 2018 announcement by the Chinese government (led by Xi Jinping) to embrace blockchain and increase investment in the technology, stating its ambition to become a world leader in blockchain technology. As part of this initiative, China launched a national blockchain network called the Blockchain-based Service Network (BSN). The BSN aims to provide a stable and reliable infrastructure for blockchain development and deployment, which will help to accelerate the adoption of blockchain technology in China.
The news came right when the crypto space was licking its wounds, having lost 80% of its market value over the prior year since Bitcoin’s $20,000 top. At the time, the mainstream media was mocking crypto and its buyers for the ‘pump and dump’ nature of the 2016-2017 bull run, but China’s news sparked a rally that saw Bitcoin run from $3,500 to $14,000 in a six-month bear market rally, even though Bitcoin itself was still persona non grata within China itself.
A Bigger Narrative Emerges
Four years later and the timing couldn’t be more perfect; a year after a Bitcoin top, a narrative has emerged that has pulled Bitcoin back from the doldrums and sent its price soaring. This time around it feels more significant, however, because while the Xi pump was narrative-focused it only related to blockchain technology, with Bitcoin just coming along for the ride. This time the narrative is all about Bitcoin and its use case as an alternative to traditional banks – the kind that are now in crisis, threatening depositors’ money.
This difference in narrative is important, and the longer the banking crisis goes on for, and the worse it gets, the more people are going to at least look at Bitcoin as an alternative. After all, this is exactly what Bitcoin was designed to do, and there is a strong argument to say that, after 14 years, its time has finally come. It’s no surprise the government has been trying to clamp down on the crypto space – we’re seeing what might happen if it is left to grow unabated.
This isn’t to say of course that everyone is going to ditch their bank for Bitcoin (after all, it can’t be used for everyday things), but the fact that its status as an alternative form of currency is being repeated by the very institutions that have disparaged it in the past shows that the tide is shifting in Bitcoin’s favor, and that this time it might be permanent.