Throughout its history, Bitcoin has seen highly unpredictable peaks and troughs. In June of last year, it reached a high of about $14,000. 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. Sadly, for Bitcoin bulls, it struggled to do so, and the price plummeted to almost $3,800.
Bitcoin assessed this resistance level 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, a huge degree of resistance.
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 because of the uncertainty. If you want to know more about bitcoin mining then visit online trading platform like bitcoin revolution.
Inflation and The Rush:
The rising inflation of the US dollar is yet 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 because of new stimulus measures. Many people are concerned about the dollar’s buying power depreciating and inflation increasing due to this. Many people have abandoned the dollar to shield themselves against and inflation, choosing instead for currencies that have historically held their value or even valued. People typically turn their dollars into commodities that are limited or less expensive in general to escape inflation or volatile markets. Precious metals, stocks of less volatile industries, and, most recently, Bitcoin are examples of these “safe-haven reserves.”
Adoption as A Means of Payment:
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 Digital currency as a payment type. The price of Bitcoin quickly rose because of this news. PayPal’s almost 350 million customers will now be able to purchase, store, and access Bitcoin with ease. More than 20 million customers have now signed up to accept PayPal as a payment method. This has far-reaching consequences beyond PayPal. Venmo, a common payment service, is also owned by PayPal. Venmo has far more than 40 million operating users highlighting the importance of Bitcoin and other cryptocurrencies. 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.
Institutional Investment:
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:
Two inherent features of Bitcoin’s design are perhaps the most important drivers of its price rise. The main is that there would only be 21 million Bitcoins produced in all. There will be no more or less of this amount, and it will remain constant. As a result, bitcoin is scarcer than every other cryptocurrency. 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 this route, its value may be about $100,000 by late 2021.