The price of Bitcoin (CRYPTO:BTC) was about $38,400 as of 12:45 p.m. EDT on Thursday, according to CoinDesk — up sharply from its weekly low of about $35,000 on Sunday. There were two big news items for Bitcoin over the past week. The first concerns a social media post by Tesla CEO Elon Musk, which may only be a short-term catalyst. However, the Bitcoin blockchain is also now officially scheduled to receive an important upgrade, which could be a more long-term demand driver.
However, it’s not as though technology company MicroStrategy (NASDAQ:MSTR) needed any more reasons to buy Bitcoin. The company is already taking on as much debt as it can to buy more and more bitcoins, as we’ll see in a minute. And considering how much it owns, it’s not surprising to see its stock rise with the price of Bitcoin in recent days. So far for the week, MicroStrategy stock is up 21%.
And with the price of Bitcoin rising, stocks that benefit from mining are also up for the week. As of this writing, Riot Blockchain (NASDAQ:RIOT) stock was up 13%, Canaan (NASDAQ:CAN) was up 8%, CleanSpark (NASDAQ:CLSK) was up 9%, and Ebang International Holdings (NASDAQ:EBON) was up 13%.
First the short-term catalyst for Bitcoin: On June 13, Musk said Tesla would start allowing Bitcoin as a method of payment again on two conditions. First, he wants to be sure at least 50% of the energy used to run the Bitcoin blockchain network is coming from clean energy sources. Second, he also wants to see Bitcoin trending in a greener direction.
While Bitcoin popped around the time of Musk’s comments, it’s important to note that most people aren’t using Bitcoin to pay for things like they would with fiat currency. In part, this is because cryptocurrency investors believe Bitcoin will increase in value over time. Therefore, it doesn’t make much sense to spend it. That’s why I see Musk’s support as a short-term boost for Bitcoin.
But what if people did want to digitally transact more with Bitcoin in the future? That could be a problem. You see, right now Bitcoin is limited with how much volume it can handle, and normal payment volume for an entire economy would be too much. This is due to how information is processed and recorded on the blockchain.
On June 12, Bitcoin developers and miners took a big step forward in addressing this scalability problem. Developers have come up with a package of upgrades for the Bitcoin blockchain called Taproot. But developers only propose ideas — miners have to signal support for the proposals by putting a marker on the blocks they process. Once enough miners have “voted” in favor of changes, the blockchain network is ready for the upgrade. And on Saturday, over 90% of miners had signaled support for Taproot, the support level needed to make it happen.
According to many developers, the Taproot update should go into effect for Bitcoin in November. Important changes…