Since its launch in 2009, the pioneering cryptocurrency continues to be a trend in the world. Despite the price drops that shock investors, Bitcoin (BTC) is the number one option. But what is the reason for this permanence and stability? The BTC falls within the general description of cryptocurrency, but despite its volatility it always recovers unexpectedly.
When Bitcoin burst onto the world scene, Spain slowly welcomed it. Most did not know what this meant until years after an independent economy was created. Bitcoin represented an evolving financial process towards a liberal economy. Its success is mainly due to the fact that people found refuge from the vagaries of state monetary policies.
As a result, new business models appeared that presented themselves as a viable alternative to bank and government control. Decentralization allowed users to migrate to investments away from inflation, speculation, control and devaluation.
Microeconomics have now been created in games and platforms that generate sustainable revenue with Bitcoin. Even when Elon Musk disapproved of the BTC for its eco-friendly mining processes, users still placed their trust in the asset. This is not only because it was the first cryptocurrency, the main reason is that it figures as the winner in the dynamics of market demand and supply.
Rise in Bitcoin prices
In the portal of Bit2me Academy they make a detailed count of the rise of the prices of Bitcoin from its beginnings to the present. This information can be summarized in several highlights of his ascent:
- Pizza Day: In May 2010, a boy named Laszlo Haynneck made the first purchase with Bitcoins in Jacksonville. This person gave 10,000 BTC in exchange for a pizza. Just five days later the price of this cryptocurrency skyrocketed by 1,000%.
- Same as the dollar: something unpredictable happened in April 2011. Bitcoin comes to be equivalent to one US dollar. In July of the same year it reached its first peak trading at 31 USD.
- Unstoppable rise: the exchange of BTC cryptocurrencies began strongly in 2013. Between October and November of that year it reached 1,000 USD. Then it had several falls with recoveries that reached 500 USD.
- Splendor: in 2017 the EFT was implemented for the first time. This promoted a capitalization of the BTC that surpassed gold. As a result, in May Bitcoin exceeded 2,000 USD. By December a unit was worth 20,000 USD.
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Some reasons for increased costs
What was described in the previous paragraph marked a trend in the rest of the history of Bitcoin: dramatic rises and major setbacks. However, unusual declines imply recoveries that far exceed expectations. Some reasons for the increased costs of BTC are:
- Availability: Bitcoin is verified by working tests running nodes to add new block strings. When this happens they receive a reward in BTC which is reduced each time 210,000 blocks are added. This process involves high mining costs and, if the price goes too low, the miners do not mine until demand increases.
- Demand and supply: being a decentralized asset, the more people want to buy BTC cryptocurrencies, the higher their price. Payment platforms that allow you to use Bitcoin also influence the demand for currency in the market.
- The use of BTC: cryptocurrencies like Ether and Ripple, were created for a specific function, unlike Bitcoin which is designed to be a monetary alternative. So its value increases as more individuals place their trust in it.
- Capitalization: is the value of all cryptocurrencies that have been generated and is calculated by multiplying the number of currencies by their current price. Capitalization is important because it helps to detect growth potential and, in the case of the BTC, it bodes well for the future.
Expert investments: every time an authority in finance or technology invests a lot of money in BTC the price skyrockets. These massive investments by a well-known company flood the market with confidence, causing small operators to invest.
Impact of Covid-19 on Bitcoin Prices
The price of it is a highly volatile one, and its response to world events and news can be unpredictable. One of the factors that has been driving up the price of Bitcoin recently is its impact on trading behavior due to the global pandemic of Covid-19.
When society was forced to stay at home, many traditional markets had decreased volumes, affecting investors’ assets. As such, many investors have looked for alternative assets like cryptocurrencies for hedging against uncertainties in the traditional market. This shift in investment has helped fuel Bitcoin’s meteoric rise to all-time highs throughout 2020.
Finally, demand from institutional investors who have started embracing crypto as digital gold and reserve assets has also helped contribute to its increasing price throughout 2020 despite an overall decrease in trading volumes for other cryptocurrencies in early 2020 due to Covid-19 pandemic. Increasing adoption by institutions as a result of changing regulatory frameworks around cryptocurrency could be expected to further push up bitcoin prices in the next few years too!
As the demand for Bitcoin continues to increase, it is likely that the price will continue to climb. The increasing demand is a result of Bitcoin’s growing adoption and usage as a global payment and investment system. Institutional investors, major corporations, retail investors, and more are joining the crypto space each day. Additionally, central banks around the world are beginning to recognize the value of digital assets, like Bitcoin, as they provide an alternative form of payment and investing versus traditional fiat currencies.
However, there are still many concerns surrounding this coin’s scalability and security that have yet to be completely resolved. As such, it is important to monitor developments in these areas closely to ensure that we have safe and reliable access to this new asset class for years to come.