Bitcoin tested 15-month highs on Monday after jumping more than 10% over the weekend, with analysts ascribing the spike to growing optimism over the adoption of cryptocurrencies after Facebook unveiled its Libra digital coin.
The original cryptocurrency hit $11,247.62 on the Bitstamp exchange late on Sunday, its highest since March last year. It later pulled back, and was last up 1.9% at $11,039.62.
Facebook said last week it planned to launch a new cryptocurrency called Libra, though the announcement immediately led to questions from regulators and politicians across the world.
Mati Greenspan, an analyst at eToro, said bitcoin’s gains underscored growing optimism among retail investors that Facebook’s plans were part of a wider trend of major companies adopting cryptocurrencies.
“They believe that Libra will create mass awareness of cryptocurrencies and act as a gateway to adoption.”
One of the biggest reasons for the bitcoin rally, analysts said, is the cryptocurrency’s next “halving” in May 2020, where the rewards offered to bitcoin miners shrink. That has constrained the supply of the digital currency.
Bitcoin relies on so-called “mining” computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes. In return, the first to solve the puzzle and clear the transaction is rewarded new bitcoins. Bitcoin technology was designed in such a way that it cuts the reward for miners in half every four years, a move meant to keep a lid on inflation.
The mining reward is currently 12.5 bitcoins. In the next halving in 2020, the reward will fall to 6.25 new bitcoins.