Source: Decrypt
The effect of bitcoin in today’s economy and its recognition worldwide has been an ongoing trend; at some point, people felt it was an illusion or a pipe dream that would cease to exist after a couple of years. When Bitcoin price increased from $572 in August 2016 to approximately $4764 in August 2017, bitcoin became more popular and attracted more popularity.
As of March 2019, Bitcoin had already gained over 7.1 million active users!
BTC price is currently around the $40,000 region, after breaking a 3-years resistance of $20,000. Bitcoin now trades in new territory, and we might begin experience more price increase in the coming months.
Bitcoin has been on a torrential rise since the early stages of Covid-19 after recovering from a dip to about $4,000. It stayed strong during the economic meltdown and rose above $9000 to reach new highs. And now at the $40,000 range, last year’s bull run produced more gains than 2017 when bitcoin nearly touched the $20,000 mark.
On December 23, 2020, the price of Bitcoin rose by around 198 percent, exceeding $23,000. The reasons for its appreciation vary, but Bitcoin has eventually evolved into a viable investment well-known by billionaire investors, large corporations, and retail investors alike, from what was once considered a scam by many.
Check out the 10 lessons from Bitcoin Investing in 2020 and how you can prepare for 2021.
Why Bitcoin?
Many companies in various industries consider Bitcoin as a form of money because its mechanism is designed to eliminate centralization and the possibility of fraud by making it a real-time transaction process. With it not involving any third-party or any intermediary, you have the full authority to choose how you manage and control your assets.
Bitcoin can only be in a digital form, which makes it more durable than any currency. You get to store it in a digital wallet, and you can access this wallet from any of your various devices. In the event of password loss, your wallet can be easily restored by a passphrase; forgetting this passphrase may lead to your total asset loss, so it’s important to take good care of this passphrase.
Bitcoin can be easily moved around and It can be used to make transactions like purchasing an item online or payment on some platforms as long as you can to access your wallet.
It was constructed without the intervention of any third party to allow peer-to-peer electronic transactions between counterparties. It doesn’t need an intermediary or a go-between, unlike a traditional currency. Transactions are reviewed in a decentralized fashion. This fact has made banking institutions anxious as it decreases the need for their operations.
Why BTC is on the increase
Source: express.co.uk
Public backing of Bitcoin investments
In the second half of 2020, the increase in the price of Bitcoin caught the attention of some big names, such as Jamie Dimon, JPMorgan’s CEO, who initially called bitcoin a scam but later compared it to gold. Stanley Druckenmiller, a billionaire investor who fully ignored bitcoin, also mentioned that bitcoin would improve gold.
The CEO of HedgeEye Risk Management, Keith McCullough, who also sold his bitcoin early in October, later repurchased it a few days after selling it, which is still in his hands to date. Bitcoin has been compared with gold and, at the same time, has a unique value in terms of transactions. Many other institutional investors and billionaires followed suit, with McCullough and other investors proclaiming bitcoin’s virtues.
Invasion of Institutional Investors
There is an increasing desire to keep less cash in the current social and economic climate and to be hedged against extreme market fluctuations.
The influx of big companies buying into the crypto market has a massive effect on the bitcoin price.
A trend recently began where publicly traded companies in their treasuries began to turn cash into Bitcoin as a more sound store-of-value. One of the most remarkable of such investors is MicroStrategy. The investment firm bought $425 million worth of Bitcoin and into its treasury. American payment giant Square also acquired $50 million in BTC. A number of businesses have followed suit since then. The confidence these businesses and their investors have in Bitcoin has given the idea of Bitcoin as a store-of-value and safe-haven asset greater merit.
Earlier Resistance
Through its trading cycle, Bitcoin has seen extremely volatile peaks and dips. The price of BTC was close to $14,000 in 2019, and it encountered strong resistance at this stage, but it struggled to break through this process. It would have definitely sparked a bull market if Bitcoin were to smash through this set back in 2019. Sadly, it failed to do so for Bitcoin bulls, and Bitcoin price descended to a low point of almost $3860.
In November 2019, Bitcoin powered straight through $14,000 and went higher. This is noteworthy because its previous all-time high of $20,000 is Bitcoin’s next point of resistance. With Bitcoin no longer having a potential resistance point, many organizations and investors have become optimistic that the cryptocurrency will re-test or even push past that price point before its previous all-time high of $20,000. The increase in the value of Bitcoin has contributed to this speculation.
A Safe-Haven against USD Inflation
Another reason for the bitcoin surge is the inflation of the US dollar and the recent stimulus spending poised to lift inflation rates and decrease the dollar’s purchasing power. With the immense contribution the United States has made through the stimulus programs to the economy, it has also played a role in the possible weakening of the dollar’s buying power, contributing to inflation. Many have had to defend themselves against inflation and the decrease in dollar buying power by taking refuge assets that can appreciate the value. These safe-haven assets are contained by low-risk bonds, gold, and most importantly, Bitcoin.
Acceptance as a Payment Mechanism
Another reason for the increase in bitcoin price is its growing use as a payment method. Paypal and Venmo recently announced that they would allow their users and merchant to buy, sell, shop, and accept bitcoin and other cryptocurrencies as a type of payment. This news caused a little surge in bitcoin price. The huge numbers of active user on both apps give bitcoin and other cryptocurrencies much more opportunity for growth.
