The latest bull cycle of Bitcoin is drawing parallels with the gold rush of the 19th century. And for all the right reasons, Bitcoin’s price has doubled since December to $40,000 in January and experienced a further growth to an incredible price of over $60,000. This boom has made Bitcoin one of the hot topics in 2020 and 2021, so it’s understandable that a lot of new investors, as well as crypto enthusiasts, are wondering what fuels this Bitcoin boom as the bull run of Bitcoin is still in full force.
Scarce Supply
One of the reasons why Bitcoin is getting so much attention is its scarce supply because the total number of BTC was capped at 21 million by the inventor of this cryptocurrency Satoshi Nakamoto. The total number of BTC compared to other cryptocurrencies is very small, and in fact, the miners have already mined about 80% of the total supply. In other words, there are about 3 million BTC left to be mined. That means that the time until this process is finished will be much shorter than many people have predicted before. Still, it will still require decades or even a whole century even with advanced equipment people are using today.
Moreover, the digital scarcity of this cryptocurrency is further fuelled by its pre-programmed event – Bitcoin halving, which is scheduled to happen every four years or when there 210,000 BTC are mined on the network. What’s more, this event results in a halved block reward, and by 2020, the reward was cut in half to 6.25 BTC, while just a decade years ago, it was 50 BTC. The next halving will be in 2024, and after that, the reward will cut to 3.725 BTC.
It should be noted that the number of BTC that are getting introduced to the network is consistently decreasing, which means that the supply is not increasing in the long run as fast as the demand for BTC. So, because the price of Bitcoin is essentially based on the economy of the supply and demand, this price keeps growing as the demand for Bitcoin is following an upward trend. That is the main reason why it has a price so higher than other types of cryptocurrencies.
Institutional Investors
Another reason why there is a huge spike in the price of BTC is the ever-increasing investments from accredited institutional investors. Not only are there a lot of crypto trust funds that are emerging on the market but also there are automated trading sites that allow anyone with little or no experience to trade online.
One example is BitcoinPro, and this is a renowned trading system that is based on AI technology and has automated the entire trading process from start to finish, which means you don’t need to manually do a lot except setting up your account, and that won’t take a lot from your time. In addition, there is a user-friendly demo account to help you get a grasp over live trading on the platform. The best part is that you can potentially earn up to $1250 in just eight hours of trading, while the minimum deposit for opening an account is $250.
When it comes to institutional investors – they fuel the boom of Bitcoin because the investments are considerably larger, and they are able to trade on behalf of numerous institutions and companies. One example is the Grayscale Bitcoin trust fund which holds the largest pool of BTC on behalf of its investors. This support has undoubtedly scaled the overall demand for BTC.
Support From Notable Companies
The last factor is the also increasing support by reputable brands, which enhance the liquidity of Bitcoin, improve Bitcoin’s reputation and drive the adoption of crypto. In this category, there are, of course, brick-and-mortar companies, small businesses, but also very reputable companies that are mostly responsible for the surge of Bitcoin’s price, such as Twitch, Tesla, Shopify, PayPal, Overstock, and a lot of other brands. But this category also features non-profit organizations like Free Software Foundation, TunaPanda, WikiLeaks, American Red Cross, and others. These investments are also affecting the stability. The best example is the investment of Elon Musk, who spent $1.5 billion in Bitcoin. That can increase the adoption even more, and make other large investors interested as well.
Potential Economic Crisis
Another reason why people became more interested in this cryptocurrency is the fact that it is decentralized, which makes it a perfect solution for protecting funds in case of recession. The 2020 was quite challenging for global economy, and there are still many active measures that are affecting some industries. While it seems that the economy is recovering, the feature of recessions is that it can show the effects years after the economy had some struggles. According to many financial experts, chances that the world will face another recession are very high, and it might be even worse than the last one in 2008.
On the other side, cryptocurrencies are part of the separate market that is not affected by the same factors like fiat currencies, banking system, stocks, and other assets. In that matter, investing in BTC can help you to avoid issues with recession and protect your assets in case of global economy crisis. Even though there are some risks related to its stability in the future, and fears that it might lose in value, there are more indicators that it will continue to grow even more. There are some predictions about it that says how it could reach the price of over $100,000 in the next few years.
Keep Track on Regulations
The main risk related to this market is seen in potential regulations and laws that could be introduced in many countries. The best example is the ban of BTC in India, who decided to replace that law with regulations that determines the taxes when people are trading with this digital asset. The same trend can be seen in many other countries, and the most common tax is 25%, while the Bitcoin is seen as property, and you will have to pay taxes as property gain. On the other side, even though there are minor chances for that, in case that some big economies decide to ban BTC and other cryptocurrencies, it will negatively affect the prices, or even make them worthless if most countries follow this trend. However, we can see that many of them are trying to find the best way to integrate the blockchain-based currencies as a regular payment method.
Last Words
It is very important to understand what can influence the changes in values of BTC and other digital assets, especially if you are interested in trading. By tracking the situation on this market, you will be able to determine the right moment for buying or selling your assets, and make a steady income from your activities on this market.
