Same reason why asset (stocks, housing) prices have skyrocketed even though there's a pandemic going on: money printing.
Gold doesn't have the same curve as BTC. Neither does pretty much anything else. Why has Bitcoin alone gone up 20% in the last month?
edit Even the post facto explanations of Bitcoins price fluctuations generally do not seem to be agreed or understood.
We can look at how economics have worked in the past to get some hints about the present, but ultimately we have no idea. We may have just entered a new era of financial and economic patterns, or we may be teetering on the verge of complete and literal collapse that would put the Great Depression to shame and have absolutely no idea. We just don't know.
Unemployment rates are slowly going back down, and the economy seems to have come to grips with how to handle the virus over the summer, so for now I think we're probably good, but the long term effects of COVID's shock to the system and the tax breaks we passed before it are probably at least 6-12 months away from starting to materialize.
The narrative that people are flocking to Bitcoin as an inflation hedge has some plausibility currently, but it doesn't explain what happened in 2017.
[1] https://www.coindesk.com/price/bitcoin
Let's assume bitcoin becomes the dominant currency for payments down the road. At its max supply, each bitcoin would be worth well over 10 million USD (in today's value of USD). And it would keep increasing in "value" because of its deflation scheme (unless of course conscencius vote for upping the supply limit for whatever reason)
So, we have a fiat currency on one side, manipulated by (at best) incompetent politicians, suffering inflation in the near term with all the stimulus we absurdly accept, a growing global debt, without a solution to repay in the horizon. And on the other side, a sane monetary policy system backed by a very solid network (all those farms + battle tested software).
In a 5+ years, these comments will look funny when people will argue that a 100k bitcoin is overvalued.
What if we don't assume that?
It's a possibility. And I don't have a crystal ball. People will make that choice. Fiat currencies may solve its deficiencies and we will happily with them. Given how global and digital the world is becoming, crypto currencies would most likely be somewhat popular anyways, unless something better comes along.
That's a new feature across asset classes, and some market participants value that. Given the limited supply, there can be supply shocks as ore market participants value its attributes.
This is basically how all money works, as a medium for productivity and assets.
Enter modern governments who print paper currency because it's far more convenient than gold but for the most part it was the same principle. When the US was still on the gold standard the idea was that the US government stored all the gold and any US dollar technically represented a share of gold in the US vaults. In fact if you were a foreign country with USD you could redeem your USD for gold. We abandoned the gold standard ~1971 and started printing fiat money which isn't technically backed by anything. There's a bunch of controversy around this but the undeniable fact is that now the Fed can and does manipulate the USD to cause inflation and deflation at certain times.
So why is holding one Bitcoin appreciating so much faster than the USD? Because the Fed is TRYING to cause inflation with the USD. They've said themselves that they are trying to target about 2% inflation I believe, (I could be wrong on that target). You do this by increasing the supply of USD whereas Bitcoin has a fixed supply so it's inherently deflationary.
So is it illogical to place value in Bitcoin? Maybe but the same can be said of the USD, moreso. Not only is it not backed by anything, it's inherently inflationary and loses value over time. Bitcoin doesn't. So if you get a paycheck for being a productive worker and you want a medium to store that value of productivity Bitcoin seems like a logical medium to store it in so that you know later on you can withdraw and it won't have lost it's value to inflation. Ofc, it could lose its value in other ways but that's the same with any asset.
2. speculation: "Someone speculating on Bitcoin over a week cares little about its fundamental value: even if you told her that Bitcoin would crash to zero for sure in three years, it would make essentially no dent in her trading profits, since you can make a lot of money in a volatile market over the course of a week if you get on the right side of the volatility."
https://review.chicagobooth.edu/finance/2018/article/bitcoin...
But there's no going back. Cryptocurrencies have their place, and they're here to stay.
The implication is that the value of the USD isn't.
That seems like a foolhardy assumption given that what I can go to the store and buy with $1 stays relatively constant day-to-day, while what I can buy with 1 BTC fluctuates wildly.
Anything trade-able is in the same category.
Things only have value because someone, somewhere is ready to buy it.
It's called supply and demand.