Four reasons why Bitcoin and other cryptocurrency prices are surging
Bitcoin, since its inception in 2009, has been the first digital currency or perhaps the stepping stone towards an ecosystem of highly volatile yet lucrative opportunities that we call cryptocurrencies.
For quite some time, the digital asset managed to grow an underground following of investors. But even though the greater part of the financial world was skeptical at first, the cryptocurrency tidal wave was hard to ignore. It soon changed from being the currency used by criminals to being considered as a possible future replacement to the physical monetary system.
The cryptocurrency market has continued to witness a boom despite the global pandemic that has been wreaking havoc on most economies of the planet. As the US dollar index slid to the lowest level for the first time in the last few years, stock market and gold prices dropped and the whole world froze, many expected Bitcoin to follow the same fate. Instead, it surged to new sky highs. In fact, since the pandemic, many cryptocurrency startups have emerged in order to cater to the ever-increasing demand for Bitcoin as well as many other cryptocurrencies.
There are a number of factors that have influenced the price surges and the resulting popularity of Bitcoin and other currencies. Four of the main driving forces behind their surging price have been mentioned below.
Cryptocurrencies, especially Bitcoin, are being viewed as a safe-haven against inflation and market volatility as a result of changing economic conditions. The current societal and economic climate has also resulted in many opting to hold less cash and instead stay hedged against market swings.
Many public companies are now converting their cash treasuries into cryptocurrency, especially bitcoin, and adding it to their balance sheet. Square, an American payments giant, recently made a $170 million investment in bitcoins. Micro strategy, a business analytics company in the US also converted $425 million worth of cash reserves into Bitcoin after considering it to be a better store of value.
Elon Musk, the co-founder of Tesla, has also said that bitcoin may be better than holding cash. He also announced in February that Tesla had bought US $1.5 billion worth of bitcoin. Tesla further said that it was also interested in letting its consumers use bitcoin for purchases.
Many other huge financial firms such as PayPal and MasterCard have also found themselves in this crypto frenzy. PayPal announced back in October 2020 that it was going to allow for buying and selling of bitcoin while MasterCard has also confessed to dabbling into cryptocurrencies.
Since the beginning of the year, many major firms have joined the crypto bandwagon with plans to add it to their balance sheet. Such confidence of corporate giants in cryptocurrencies has added more merit to it, a future currency and store of value which has led to increase in prices.
Due to mainstream acceptance and the ease of use of cryptocurrencies, many companies have allowed consumers for its use.
A number of trading platforms have also appeared that have made trading cryptocurrencies much more easier and convenient for users. These platforms use advanced technologies such as Artificial Intelligence (AI) and Distributed Ledger Technology (DLT) to predict trends and capitalize on crypto booms. They are quite easy to use. In fact, you barely need to dedicate any time to these as they trade on your behalf. One such platform is bitql. To get acquainted with this platform, visit the website.
Most cryptocurrencies in the market have a limited supply, for instance, bitcoin is capped at 21 million. The third Bitcoin Halving event took place this year. Bitcoin halving takes place every four years and is considered to be a significant event in the Bitcoin network.
New bitcoins are introduced in the market by “miners” that mine bitcoin. Mining is done by verifying bitcoin blocks which essentially are groups of bitcoin transactions. Every ten minutes, supposedly a miner that is successful in verifying blocks gets awarded a specific amount of bitcoins as a reward.
Currently, this reward stands at 6.25 BTC per block mined and is supposed to reduce by half every four years or after every 210000 blocks mined. This phenomenon is referred to as bitcoin halving.
Halving is perhaps one of the most critical factors that contribute to the price variations of Bitcoin. As there are only 21 million in total, the circulation of the market currency slows down as the reward decreases. More scarcity would mean more demand which, in turn, would result in a higher price. As Bitcoin holds more than half of the market capitalization, which is currently at $1 trillion, its price variation may affect other currencies.
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