Massive hype is gradually starting to grow around Bitcoin – just like it was during the previous stage of cryptocurrency growth in 2017. Last week, the coin crossed the psychologically important level of $ 50 thousand and rushed up.
In addition to this, BTC is now much more often discussed both in the circles of the leaders of various large companies and in government organizations. However, what actually makes Bitcoin so expensive – especially this year?
Note that the question of the value of Bitcoin remains open – especially for many newbies. It is usually difficult for new people in the cryptocurrency industry to understand why others are willing to pay huge amounts of money for something that they cannot see and touch. In addition, the value of the cryptocurrency is essentially unsupported, which means it can jump in different directions at an incredible pace.
Perhaps one of the simplest answers regarding the value of Bitcoin is that it «is worth exactly what someone will pay for it.» However, all this is influenced by a number of other factors that make BTC unique compared to its «competitors». The cryptocurrency is still very young compared to assets like gold and stocks, so it is very likely that it will continue to rise. Also, many experts still do not exclude the scenario of a complete collapse of Bitcoin – or at least noticeable problems.
However, there are reasons for the formation of a high price for cryptocurrency – and more than one. Here are three of them that are particularly influential in shaping Bitcoin’s good reputation in the eyes of investors.
The history of cryptocurrency and its application
Recall that the idea of decentralized currencies existed long before Bitcoin. However, it was only in 2008 that a certain developer under the pseudonym Satoshi Nakamoto was able to translate it into reality in approximately the form in which we know it now. The first bitcoins circulated in narrow circles of cryptocurrency fans back in 2009 and were not tied in value to any «real» asset. Around the same time, the famous purchase of two pizzas for 10 thousand BTC took place, which will forever remain in the history of the cryptocurrency.
Dollar inflation versus Bitcoin deflation
Then another important stage in the history of cryptocurrency followed – it began to rapidly gain popularity as a means of payment for various kinds of prohibited goods and services. The first peak in BTC’s popularity fell on the history of the Silk Road site on the darknet, the collapse of which we described in detail in a separate article.
Now, BTC is mostly perceived as a means of preserving capital – in large part due to the constant long-term rise in the price of the coin. In addition, due to the new crisis caused by the spread of COVID-19, Bitcoin is also considered to be a profitable hedge against inflation.
Hence, we draw an important conclusion: the value of a cryptocurrency in the eyes of investors is also ensured by its long history . Bitcoin has existed for more than twelve years and during all this time it did not give reason to doubt itself. This means that cryptocurrency buyers also see it as a mechanism that will not fail and will perform its own functions.
Investments of large players
Over the past year, many large companies, including Tesla and MicroStrategy, have “had a hand” in the growth of the crypto market. The latter, by the way, is currently the largest holder of BTC among organizations around the world.
Ten largest BTC holders among companies in the world
Many individual investors simply follow the lead of these whales and invest in assets where the smart money goes. And as you can see, over the past few months, only profit could be made with such a strategy.
That is, in this case, the reputation of the cryptocurrency is supported by world-famous companies. This means that Bitcoin is no longer a «tool of speculators», as bankers and officials like to say, but a full-fledged means of investment.
Lack of connection with other assets
What is Bitcoin’s price actually tied to? The short answer to this question is: BTC is not tied to the exchange rate of governments, markets, or the behavior of other common currencies. In the past, BTC has also shown some level of correlation – that is, connection – with the stock market, however, the cryptocurrency itself exists on a decentralized basis, supported by miners around the world. By the way, the CEO of the aforementioned MicroStrategy company Michael Sailor previously characterized Bitcoin with the following quote, Cointelegraph reports.
It should be emphasized that Bitcoin is a masterpiece of monetary engineering. It is the first successfully designed money network in world history.
In addition, now BTC, according to Sailor, is going through a series of important changes.
Bitcoin is moving away from the old paradigm this year, which is that it is an independent speculative asset. It is becoming the world’s best long-term investment.
Some people really invested in Bitcoin, including in order to protect themselves from a possible negative situation in the stock market or other niches, because the cryptocurrency does not depend on it. As the last year in a pandemic has shown, this important feature rewards investors. And this is also a plus, adding points to the value of BTC.
As a result, we believe that Bitcoin is the center of a new revolution in finance – and now this is its main value. The more people realize the fact that BTC is innovating and dominating the digital world, the more money flows into the crypto market. It is likely that in the coming years, Bitcoin will become a full-fledged alternative to gold, or even replace the precious metal altogether. At least, fans of the cryptocurrency do not doubt this, who predict it the title of the main asset in the world.