In recent weeks Bitcoin ‘s price has seemed to continue marching higher. But what is driving this increase ? It turns out there are a wide variety of factors that continue to make Bitcoin get up in value .
Reading: Why Is Bitcoin’s Price Rising?
- Bitcoin broke a key resistance level making investors believe there is further upside.
- Rising inflation and the potential for even more stimulus continues to push people to safe-haven assets.
- Increased adoption from payment applications like PayPal will give far more people easy access to cryptocurrency.
- Publicly traded companies purchasing Bitcoin shows a high level of confidence in its appreciation.
- Bitcoin’s historical trend of closely following its halving stock-to-flow model shows an ambitious and extremely bullish outlook.
Bitcoin has seen extremely volatile peaks and troughs in its fourth dimension. Its last peak was near $ 14,000 in June of 2019. At this indicate, Bitcoin experienced a hard resistance and it failed to push through this stage .
If Bitcoin were to break through that resistor in June it would have likely triggered a taurus market. unfortunately, for Bitcoin bulls, it failed to do then and cascaded down to a low compass point of closely $ 3,800 .
In October, Bitcoin retested this immunity sharpen entirely to fall back down. On November 4th, Bitcoin pushed straight through $ 14,000 and continued higher. This is significant because Bitcoin ‘s next resistor target is its previous all-time high of $ 20,000 .
With Bitcoin no farseeing having a theoretical resistance point until its previous all-time high of $ 20,000, many investors have become bullish that the cryptocurrency will be able to retest that price point or even crusade by it. This meditation has lead to an increase in Bitcoin ‘s value .
inflation and the Rush Toward Safe-Haven Assets
Another reason for Bitcoin ‘s rise is the growing ostentation of the U.S. dollar. While ostentation is on average 2 % each year, holocene stimulation outgo is poised to greatly increase the level of inflation and decrease the dollar ‘s purchasing power .
With the holocene stimulation packages, the United States has added around $ 2.4 trillion to the economy. This has many worrying about the inevitable decrease in the dollar ‘s purchasing baron and the rebel in inflation .
hypertext transfer protocol : //fred.stlouisfed.org/series/M1 .
To hedge against this rising inflation, many have retreated from the dollar and have taken shelter in assets that historically have held respect or have flush appreciated in value. typically, assets that people convert their dollars into to avoid inflation or volatile markets are ones that are barely or are less fickle in general. These ‘ safe-haven ‘ assets include things like precious metals, stocks in sectors that are by and large less volatile, and more recently, Bitcoin .
adoption as a Means of Payment
Another reason for Bitcoin ‘s price appreciation is its growing adoption as a payment method. recently, PayPal ( PYPL ) announced that it would soon allow its users and merchants to buy, sell, hold, and accept Bitcoin and early cryptocurrencies as a mannequin of payment .
This news pushed Bitcoin ‘s price higher immediately. PayPal has about 350 million users who will now have the ability to easily buy, store, and practice Bitcoin. PayPal besides has well over 20 million active merchants who can now accept the currentness .
aside from PayPal, this has far implications. PayPal besides owns the wide popular payment app, Venmo. Venmo has more than 40 million active accounts, making the approachability to Bitcoin and early cryptocurrencies even more significant .
While PayPal and Venmo are newer to crypto, there are a host of other applications that allow its users to buy, sell, and keep. popular competitors to PayPal and Venmo, Square ( SQ ) and CashApp, besides accept cryptocurrencies making the hearing to Bitcoin even wider .
As discussed above, there is a growing narrative of Bitcoin as a safe-haven asset. In the current social and economic climate there is a growing incentive to hold less cash and be hedged against intense grocery store swings .
recently, a course started where publicly traded companies were beginning to convert cash in their treasuries over to Bitcoin as a more healthy store-of-value. Most notably, MicroStrategy, a business analytics caller, converted $ 425 million worth of cash in its treasury to Bitcoin. shortly after the payments company Square made a $ 50 million purchase .
Since then, a number of companies have followed suit. The confidence that these companies and their investors have in Bitcoin has given increased deserve to the concept of Bitcoin as a store-of-value and safe-haven asset .
Halving and the Stock-To-Flow exemplar
possibly the most crucial reasons for the rise in Bitcoin ‘s price are two attributes that are implicit in in its design .
The first : there is alone 21 million Bitcoin that will always exist. There will be nobelium more and no less and this number will always stay inactive. This makes bitcoin more scarce than anything that has come before it. other scarce assets are not 100 % finite and in some cases, they can be synthetically manufactured .
The second is a process coded into Bitcoin called the halve. basically, Bitcoin has its own built-in escrow mechanism where Bitcoin is released and given to miners as a reinforce for processing transactions. This reinforce is cut in half every four years .
By doing so, Bitcoin ‘s rate of inflation is reduced by half each halve and its stock-to-flow proportion is doubled each halve. This process continues every four years until all Bitcoin in this escrow mechanism is released and in circulation. From that point on Bitcoin in circulation will be capped at 21 million. As of the time of publish, there are 18,534,818 in circulation .
thus far, Bitcoin ‘s price has followed its stock-to-flow ratio identical closely and if it were to continue on this trajectory Bitcoin ‘s value could be somewhere around $ 100,000 in late 2021 .
hypertext transfer protocol : //digitalik.net/btc/ .
Rising cost of production
Another reason for Bitcoin ‘s rise is that as the size of mining network grows, so does the mine difficulty — which, in turn, increases the marginal cost to produce a bitcoin. Bitcoin mining requires a big bargain of energy, and this has a real monetary value that must be paid by miners in their local anesthetic currency. Because Bitcoin ‘s protocol mandates one blocking be found, on average, every ten minutes, the more hash ability directed at mine does not increase the rate of newly supply – it lone increases the difficulty of mine. Research has shown the the price of a bitcoin has closely tracked its borderline cost of production .
Cryptocurrency Performance for 2020
2020 returns –
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