Reuters / Lucas Jackson
- Bitcoin has more than doubled in less than a month, with analysts and investors stunned and worried about a potential market bubble.
- The token rally in recent months is in many ways, significantly different from the boom seen three years ago, as buyers now range from casual day traders to fund managers managing billions of dollars in assets.
- Some investors will see the token as a new inflation hedge in the wake of easing financial conditions and trillions of dollars.
- The driving forces behind Bitcoin driving are detailed below, and why experts do not believe that cryptocurrency will crash as it did in 2017.
- Visit the Business Insider homepage for more stories.
It took almost 11 years for Bitcoin to reach 20,000 20,000 per coin for the first time in 2017. Just 22 days later, the world’s most popular cryptocurrency has surpassed વધુ 20,000 more, and its momentum is still strong.
Bitcoin’s rapid rise in 2017 led to a rapid sell-off that erased most of the gains it had made. But no such trend has emerged at the moment, and experts say the combination of factors has accelerated token growth by 2020 and will continue to boost Bitcoin in the new year.
The three reasons behind the rise in the price of Bitcoin are detailed below, and a discussion of why it is likely to crash as seen two years ago.
(1) Fear of getting lost
Passionate retail investors rallied for Bitcoin in 2017, while public companies climbed the latest token. Jimmy Nugiana, president of the Bitcoin Association, told Insider that when રે 5,425 million worth of bitcoins were purchased in August and September, Microsteregi began a chain reaction. The move provides an opportunity for other public companies to view Bitcoin as a viable reserve asset.
Square followed with its own million 50 million purchases in October yet, prices began to rocket higher until PayPal adopted Bitcoin. The company announced on October 21 that it would allow its hundreds of millions of users to buy, sell and hold bitcoin. The token reached its highest level since July 2019 as investors adopted it as a key step forward for the widespread use of Bitcoin.
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“Knowing that Bitcoin has a limited supply, people look to it as a reserve asset, and say, ‘Well, I want it before my share of it goes too high.’
Institutional investors were then pulled into the fray after the rise in Bitcoin prices. Fund managers who turned their attention to the token and feared a violent fall in its price felt that they were losing strong returns and began to transfer some cash into cryptocurrencies.
Institutional investors have since pushed billions of dollars into the cryptocurrency market. According to Douglas Borthwick, chief marketing officer of digital-asset trading platform INX, his involvement has played the biggest part in the meteorological growth of tokens by the end of 2020.
“If you don’t have something good in your portfolio that’s performing well, you won’t perform well. People will leave your funds,” Borthwick told Insider. “You’ve got bigger and bigger position sizes than chasing smaller and smaller numbers of bitcoin in your circulation.”
(2) Demand for inflation hedge
Bitcoin may at first seem completely disconnected from the coronavirus epidemic, but the outcome of the health crisis has played a crucial role in supporting token prices. Governments around the world have passed billions of dollars in financial stimulus to offset the economic damage caused by the epidemic.
Fresh currency inflows and easing financial conditions have fueled Bitcoin’s case as a hedge against inflation, JPMorgan analyst Nicholas Panigirtzoglo said in November. Tokens serve as an alternative to gold and other hedge assets from insulation from a limited supply of 21 million tokens and policy decisions.
“Printing that money means everyone in the world is looking for hard-to-find assets to invest in, something that isn’t growing in terms of supply,” Borthwick said.
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()) Enhancing legitimacy
Companies and institutional investors that have been warming up to Bitcoin have recently legalized assets known for their weaker use than expected. During Token’s 2017 rally, people less familiar with cryptocurrencies linked them to “negative activities,” Borthwick said.
PayPal’s adoption and the influx of institutional funds have given Bitcoin new legitimacy and interest in retail investors, Borthwick added. And just yesterday, the U.S. The Office of the Comptroller of the Currency said national banks could use blockchain networks and stablecoins for payments, legalizing digital currencies.
“The bigger the names get into space and the more regulators start writing rules about it, the more it becomes a mainstream asset,” Borthwick said.
By the end of last year, curiosity had spread among everyday investors. Global search interest for Bitcoin has tripled since the beginning of October to the beginning of January, according to Google Trends data. From celebrities Actress Massey Williams To Rapper Mick Mill Tweeted about entering the cryptocurrency market. In a matter of months, those who push cash into Bitcoin have grown from fund managers and crypto-fanatics to practically everyone else, Borthwick said.
“There is a definite ground rush to invest in crypto space,” he added. “Now he’s no longer friends and family and old friends.”
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What’s next for red-hot cryptocurrency
The rapid doubling of Bitcoin has encouraged some investors to naturally consider the token bubble. JPMorgan said Monday that the token rally moves it into “more challenging territory”, and that a steady climb at its current pace would likely “prove unbearable.”
The market may very well be “full of some sort of improvement,” but the likelihood of seeing it three years ago is low, Nugien said. Institutional investors are preparing to maintain their bitcoin positions for fear of premature sale and loss of additional returns.
Growing interest in blockchain and cryptocurrency also prevents prices from returning to recent lows, Borthwick said.
He said, “What you are talking about here is the adoption of something by everyone in the world in a very short period of time.” “I don’t think there’s anything like that at the top when you talk about new technologies.”
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