Bitcoin reached an all-time high of $48,000 in early 2021. Since the launching of Bitcoin in 2009, its value has grown slowly — experiencing sudden bullish movement from time to time.
Surprisingly, Bitcoin recorded a historic bullish movement while the whole world faces economic uncertainties due to the covid-19 pandemic. One question keeps coming to mind — why is Bitcoin increasing in value, and will this bullish trend continue?
The value of bitcoin was at $4,788 in march 2020. The price of Bitcoin rose to around $30,000 by the end of 2020. And eventually hit $48,000 in early 2021.
Why is the Price of Bitcoin Increasing?
Investors and experts have been keen on understanding the recent bull market. Something similar happened in 2017. During that time, the price of Bitcoin jumped by almost a multiple of 20 to about $20,000. However, it moved down to $3,000 after one year. The question is; is this recent bull market the same as the 2017 financial bubble? Then, investors were merely following the crowd. Let’s see if the game is different in 2021.
- Endorsement by Some Big Names
Billionaires and big brands have invested heavily in Bitcoin and other cryptocurrencies. The adoption of Bitcoin by billionaires and institutions has boosted trust in cryptocurrencies. It’s a positive signal that digital currencies are going mainstream. Billionaire investors like Paul Tudor Jones and Elon Musk have invested heavily in Bitcoin.
MassMutual, the insurance giant, has done the same. PayPal now allows users to transact Bitcoin directly from their accounts. There is a considerable increase in the number of vendors that accept Bitcoin as a form of payment.
- Fear of Inflation
Due to the stimulus bills paid by the government to citizens, more money has gone into circulation. This has a long-term effect on inflation and the lowering of purchasing power of the dollar. To hedge against inflation, investors have switched to assets that either maintain value or increase in value.
As a result, people are driven to store-of-value assets, including Bitcoin. Bitcoin is a store-of-value asset that stands out. This is because it has a verifiable finite and fixed supply.
- Recognition By Governments
Central banks and governments around the world have recognized cryptocurrencies. Some are now considering central bank digital currency (CBDC). CBDCs are not cryptocurrencies as banks or governments regulate them. They depict the government’s recognition of digital currencies.
Consequently, cryptocurrency gets more dependable, and people tend to invest more in it. Some countries, including Canada, China, Russia, and the EU, are working on (or planning to) central bank digital currencies. The US federal regulator has approved payment with stablecoins in retail banks. Governments now appreciate how secure blockchain technology is and how to apply blockchain solutions. All these show that the movers in the financial world see cryptocurrencies as the future.
Does Bitcoin Have the Potential of Reaching $150,000 to $200,000 in the Next Few Years?
With the bull market’s current pace, Bitcoin can reach $200,000 before or by the time its supply finishes. Out of 21 million bitcoin, 18.5 million are already in circulation — scarcity will increase, leading to an excessive rise in price. However, there are many perspectives to this argument.
Some experts, such as David Rosenberg don’t believe that the present Bitcoin price appreciation will be sustainable. They believe the increase in price results from a follow-the-herd financial bubble (as witnessed in 2017). In a Forbes article written by Clem Chambers, CEO of private investors website ADVFN, he said that bitcoin price is FOMO-driven (fear of missing out). He believes Bitcoin price will fall as the FOMO starts declining.
On the other hand, there are bullish forecasts. The founders of Gemini (crypto exchange company), Tyler and Cameron Winklevoss forecast that bitcoin will eventually reach $500,000 per coin. In the same vein, an analyst from Citibank believes that by December 2021, the price of Bitcoin will reach $318,000.
These bullish forecasts look too optimistic. However, only a few people would have believed if told that Bitcoin price was going to hit $48,000 in early 2021. Whatever happens, one thing is sure: Bitcoin will make waves in the financial world in years to come.