It turns out that a slew of reasons is conspiring to keep Bitcoin’s valuation rising. Throughout its history, Bitcoin has seen highly unpredictable peaks and troughs.
Bitcoin ran into a lot of opposition at this stage, and it couldn’t get through it. If Bitcoin had broken through the resistance in June, it would almost certainly have started a bull market. Unfortunately for Bitcoin bulls, it struggled to do so, and the price plummeted to almost $3,800. If you want to know which industries are planning to invest in bitcoin, visit yuanpay group.
Bitcoin retested this resistance point in October, only to slide back down. Bitcoin broke through $14,000 on November 4th and has since risen steadily. This is important because Bitcoin’s next pressure point is its former all-time peak of $20,000, which is a significant resistance level. With Bitcoin no longer possessing a potential resistance point until its former all-time peak of $20,000, several investors are optimistic that the blockchain would be able to retest or even break beyond that level. Bitcoin’s valuation has increased as a result of the speculation.
Inflation for Safe-Haven Assets:
The rising inflation of the US dollar is another factor behind Bitcoin’s growth. Although inflation currently averages 2% a year, recent government expenditure is on track to significantly raise inflation and erode the dollar’s buying power.
The United States has contributed $2.4 trillion to its economy as a result of new stimulus packages. Many people are concerned about the dollar’s buying power depreciating and inflation increasing due to this. Many people have withdrawn from the dollar to protect themselves from increasing inflation, opting for currencies that have traditionally been retained or even appreciated. People typically turn their dollars into commodities that are scarce or less expensive in general to escape inflation or volatile markets. Precious metals, stocks of low-volatility industries, and, more recently, Bitcoin are examples of these safe-haven’ investments.
Acceptance as A Payment Option:
The growing acceptance of Bitcoin as a payment system is another explanation for its price increase. PayPal (PYPL) recently revealed that its customers and retailers would shortly be able to purchase, sell, keep, and acknowledge Bitcoin and other cryptocurrencies as a type of payment. The price of Bitcoin quickly rose as a result of this news. PayPal’s almost 350 million customers will now be able to purchase, store, and access Bitcoin with ease. PayPal already has more than 20 million registered merchants that will embrace the currency.
Through PayPal and Venmo are newer to the crypto world, there is a slew of other apps that enable users to purchase, sell, and keep cryptocurrency. Square (SQ) and CashApp, two well-known challengers to PayPal and Venmo, all support cryptocurrencies, broadening Bitcoin’s appeal.
Investments by Institutions:
As previously stated, the idea of Bitcoin as a safe-haven currency is gaining traction. There is an increasing desire to have less cash on hand in today’s social and economic environment and be hedged against price fluctuations. Recently, a movement began to emerge in which publicly listed firms began to transfer cash in their treasuries to Bitcoin as a more reliable store of value. MicroStrategy, a market intelligence firm, was the first to turn $425 million in cash in its treasury to Bitcoin. Square, a payments firm, bought the company for $50 million shortly later.
Several other businesses have followed suit since then. The belief that these businesses and their owners have in Bitcoin has provided the notion of Bitcoin as a store of wealth and safe-haven commodity more credence.
Halving and The Stock-To-Flow Model:
Two characteristics intrinsic in Bitcoin’s architecture are among the most significant factors for its price increase. Other scarce commodities are not fully limited, although, in certain circumstances, they may be produced synthetically.
The second is a method known as halving, which is coded into Bitcoin. Bitcoin, in essence, has its built-in escrow system, in which Bitcoin is published and distributed to miners as compensation for processing transactions. Every halving reduces Bitcoin’s inflation rate by half and increases its stock-to-flow ratio by a factor of two. This procedure repeats every four years until all Bitcoin kept in this escrow system has been published and circulated. From that stage on, the number of Bitcoins in existence would be limited to 21 million. There are 18,534,818 coins in production at the time of publication.
Bitcoin’s price has been closely following its stock-to-flow ratio thus far, and if it continues on this route, its value may be about $100,000 by late 2021. Since everyone’s case is different, it’s still a good idea to seek advice from a trained advisor before making any financial decisions. Investopedia offers no guarantees or claims about the authenticity or timeliness of the details provided.