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.
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- Why Is Bitcoin At All-Time Highs? – Forbes Advisor
- Bitcoin Is Going to Crash. The Big Question Is When
- Get the Latest from CoinDesk
In recent weeks Bitcoin's price has seemed to continue marching higher. But what is driving this growth?
Why Is Bitcoin At All-Time Highs? – Forbes Advisor
It turns out there are a wide variety of factors that continue to make Bitcoin rise in value. Bitcoin has seen extremely volatile peaks and troughs in its time. At this point, Bitcoin experienced a hard resistance and it failed to push through this stage. If Bitcoin were to break through that resistance in June it would have likely triggered a bull market. In October, Bitcoin retested this resistance point only to fall back down. This speculation has lead to an increase in Bitcoin's value.
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- Crypto News: Why Is Bitcoin's Price Rising??
Another reason for Bitcoin's rise is the growing inflation of the U. This has many worrying about the inevitable decrease in the dollar's purchasing power and the rise in inflation. To hedge against this rising inflation, many have retreated from the dollar and have taken shelter in assets that historically have held value or have even appreciated in value.
Typically, assets that people convert their dollars into to avoid inflation or volatile markets are ones that are scarce or are less volatile in general. These ' safe-haven ' assets include things like precious metals, stocks in sectors that are generally less volatile, and more recently, Bitcoin. 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 other cryptocurrencies as a form of payment.
This news pushed Bitcoin's price higher immediately. PayPal has nearly million users who will now have the ability to easily buy, store, and use Bitcoin. PayPal also has well over 20 million active merchants who can now accept the currency. Aside from PayPal, this has further implications. PayPal also owns the widely popular payment app, Venmo. Venmo has more than 40 million active accounts, making the accessibility to Bitcoin and other 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 hold. As discussed above, there is a growing narrative of Bitcoin as a safe-haven asset. In the current societal and economic climate there is a growing incentive to hold less cash and be hedged against intense market swings. Recently, a trend started where publicly traded companies were beginning to convert cash in their treasuries over to Bitcoin as a more sound store-of-value.
Since then, a number of companies have followed suit. The confidence that these companies and their investors have in Bitcoin has given increased merit to the concept of Bitcoin as a store-of-value and safe-haven asset.
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- Big Companies Are Buying Bitcoin.
Perhaps the most important reasons for the rise in Bitcoin's price are two attributes that are inherent in its design. The first: there is only 21 million Bitcoin that will ever exist. There will be no more and no less and this number will always stay static. This makes bitcoin more scarce than anything that has come before it. The second is a process coded into Bitcoin called the halving. Essentially, Bitcoin has its own built-in escrow mechanism where Bitcoin is released and given to miners as a reward for processing transactions.
This reward is cut in half every four years. By doing so, Bitcoin's rate of inflation is reduced by half each halving and its stock-to-flow ratio is doubled each halving. 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 writing, there are 18,, in circulation. Investing in cryptocurrencies and Initial Coin Offerings "ICOs" can be highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs.
Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. Possibly most importantly, Visa has been warming to bitcoin. In October it announced a handful of bitcoin-related credit and debit cards with leading crypto exchange Coinbase.
With more and more ways of using bitcoin, it should mean that more people will want to hold it.
Bitcoin Is Going to Crash. The Big Question Is When
Bitcoin has also become much more mature since the days when it was used mainly as a method to purchase drugs on the dark web on Silk Road. Bitcoin digital wallets, keys and exchanges are easier to access and there is a lot more reliable information out there than before. The introduction of financial products such as bitcoin futures and options, as well as blockchain-related funds , has allowed investors who might otherwise have been fearful of volatility to get involved. Nobel laureate Robert Shiller has suggested that the bubble could have been linked to the fact that there were no bitcoin futures at the time.
Besides all this mainstream enthusiasm, the carnage brought by COVID has led to huge stimulus packages from governments around the globe and many central banks printing more money. In the face of this threat, investments like bitcoin are being consider a store of value. The maximum number of bitcoin that will ever exist is set at 21 million unless the protocol changes , and there are already about The supply of new coins is also slowing down because the reward that bitcoin miners receive for verifying transactions on the blockchain halves roughly every four years — it fell from BTC This scarcity is comparable to that of precious metals.
Even central banks are embracing cryptocurrencies.
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Russia, China, Canada, the EU and many others are either already working on central bank digital currencies CBDCs for their countries or publishing white papers detailing their intentions to do so. This is an obvious sign that the powers that be in the old financial world are seeing cryptocurrencies as the future.
Meanwhile, the US federal regulator has announced that retail banks can carry out payments with stablecoins, which are cryptocurrencies pegged to traditional currencies. It therefore seems that the recent bitcoin price appreciation may have more substance than in But not everyone agrees.
Rosenberg is well placed to comment on bubbles since he is known for identifying the US housing market bubble that led to the global financial crisis of Meanwhile, large volatility in the price is still a major issue, which will still worry some institutional investors. So what to believe?