Why Is Bitcoin's Price Rising?

 Why Is Bitcoin's Price Rising?

Election uncertainty and comments from central banks have emboldened investors.


Bitcoin broke a key obstruction level causing financial backers to accept there is further potential gain. 
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Rising expansion and the potential for considerably more boost keeps on pushing individuals to place of refuge resources. 

Expanded selection from installment applications like PayPal will give undeniably more individuals simple admittance to cryptographic money. 

Traded on an open market organizations buying Bitcoin show an undeniable degree of trust in its appreciation. 

Bitcoin's chronicled pattern of intently following its dividing stock-to-stream model shows an aggressive and incredibly bullish standpoint.

Past Resistance 

Bitcoin has seen amazingly unstable pinnacles and box in now is the right time. Its last pinnacle was close to $14,000 in June of 2019. Now, Bitcoin encountered a hard opposition and it neglected to push through this stage. 

If Bitcoin somehow happened to get through that obstruction in June it would have likely set off a positively trending market. Shockingly, for Bitcoin bulls, it neglected to do as such and fell down to a depressed spot of almost $3,800. 

In October, Bitcoin retested this obstruction direct just toward fall down. On November fourth, Bitcoin pushed straight through $14,000 and proceeded with higher. This is huge in light of the fact that Bitcoin's next obstruction point is its past unequaled high of $20,000. 

With Bitcoin did having a hypothetical opposition point until its past record-breaking high of $20,000, numerous financial backers have become bullish that the digital money will actually want to retest that value point or even push past it. This theory has lead to an increment in Bitcoin's worth. 

Expansion and the Rush Toward Safe-Haven Assets 

Another purpose behind Bitcoin's ascent is the developing expansion of the U.S. dollar. While expansion is on normal 2% every year, late upgrade spending is ready to incredibly build the degree of swelling and lessening the dollar's buying power. 

With the new upgrade bundles, the United States has added around $2.4 trillion to the economy. This has many agonizing over the unavoidable abatement in the dollar's buying power and the ascent in swelling.

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.

Adoption as a Means of Payment

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 350 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. Popular competitors to PayPal and Venmo, Square (SQ) and CashApp, also accept cryptocurrencies making the audience to Bitcoin even wider.

Institutional Investment

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. Most notably, MicroStrategy, a business analytics company, converted $425 million worth of cash in its treasury to Bitcoin. Shortly after the payments company Square made a $50 million purchase.

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.

Halving and the Stock-To-Flow Model

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. Other scarce assets are not 100% finite and in some cases, they can be synthetically manufactured.

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 18,534,818 in circulation.

So far, Bitcoin's price has followed its stock-to-flow ratio very closely and if it were to continue on this trajectory Bitcoin's value could be somewhere around $100,000 in late 2021.

Bitcoin Stock-To-Flow Model

Cryptocurrency Performance: Year-to-Date

Crypto YTD
  • Bitcoin (BTC) YTD: +111.66%
  • Ethereum (ETH) YTD: +228.28%
  • Ripple (XRP) YTD: +28.90%
  • Bitcoin Cash (BCH) YTD: +31.91%
  • S&P 500 YTD: +8.35%

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