The rally in Bitcoin, which in recent days reached $ 18,000 and then retraced slightly below, arousing the interest of analysts. Here are the reasons that are driving the growth of cryptocurrency.
Why has Bitcoin reached its highest value in the last 3 years?
The questions about the positive performance of the asset have been challenging analysts for some time but in recent days, with the jump of the currency beyond the $ 18,000 threshold, interest in the factors that are contributing to increasing the value of Bitcoin has accelerated.
The relevance of the issue revolves around the history of Bitcoin, which had already recorded a particularly positive trend in 2017 (historical record of $ 19,666 in December 2017) and then burned 70% of its value the following year.
Identifying the conditions and elements underlying the current success of cryptocurrency, therefore, is a crucial operation to understand the long-term prospects of Bitcoin.
Because Bitcoin is close to the historical record
Bitcoin was created eleven years ago by the mind (or minds) of Satoshi Nakamoto, the fictional name behind which lies the secret of cryptocurrency. From the original code of the virtual currency it is clear that there are only 21 million Bitcoins that can be produced, of which 18.5, 90% of the total, are already in circulation.
Bitcoins are mined by miners, people who use a computer's processor to perform the necessary mathematical calculations. According to some estimates, it will take around 120 years for the remaining 10% of Bitcoin to be mined.
This perceived scarcity represents a first explanatory factor for the success of the cryptocurrency. Reduced availability generally does not directly imply an increase in the value of the asset but, in the case of Bitcoin, the awareness that in the future there will be fewer cryptocurrencies plays a role in the increase in demand.
The growth of stablecoins, cryptocurrencies that do not suffer from volatility as they are usually anchored to traditional currencies, such as the dollar or the euro, is also crucial. Stablecoins have recently become one of the main sources of liquidity in the cryptocurrency market.
Supported by governments and large companies, these cryptocurrencies have given greater credibility to the entire virtual currency sector, with major world economies such as China, the US and the European Union, which are evaluating the possibility of producing national digital currencies.
Moreover, the conditions that led to the birth of Bitcoin in 2009 seem to be reproducing today. The cryptocurrency was in fact created, in part, as a response to the rivers of dollars and euros that were printed to counter the financial crisis of 2008.
The same operation is taking place today, with global monetary authorities pledged to cheer up economies hit by the pandemic.
Charles Hayter, CEO of CryptoCompare, expressed himself on the matter, who in an interview with the financial site MarketWatch revealed:
Bitcoin, as a sort of digital gold, is experiencing a particularly favorable period thanks to the doors opened by monetary policy. Closing these doors will be more difficult than opening them.
Also of note are the lowest interest rates in the United States and Europe, which are making it less expensive to own Bitcoins than dollars or bonds. In the background also the maneuvers of large groups, such as PayPal or Square, which have contributed to the consolidation of the credibility of cryptocurrencies by allowing their customers to purchase products with their virtual coin wallet.
Bitcoin Rally: what are the differences with 2017?
Bitcoin's performance has inevitably turned the spotlight on the cryptocurrency history. In 2018, the growth trend of the virtual currency had in fact led to a sudden turnaround following the bursting of a bubble.
Given the current yield of Bitcoin, analysts are now wondering if the factors that are fueling the rally are more solid than those that led the cryptocurrency to a step from $ 20,000.
Bitcoin, at present, has a higher value than in the same period three years ago. Bullish cryptocurrency investors are pointing to charts to mark the difference between the current rally and the one that preceded the Bitcoin crash.
In fact, in 2017, the curve relating to the value of the virtual currency had recorded a sharp rise in the last five weeks of the year, while the current one appears as a more stable and uniform growth trend.
This, according to Gain Capital analyst Matthew Weller, highlights less "hype" around cryptocurrency compared to three years ago, which could indicate more sustainable growth even in the event of an asset "pullback" in the coming weeks. .
On the other hand, critics of cryptocurrency resist, which has often been associated with money laundering activities. Among these Jamie Dimon, CEO of JP Morgan, who reiterated his lack of interest in virtual currencies during a summit on Wednesday. In the background, the regulations that governments could impose on cryptocurrencies. These, according to Dimon, could lead to a loss of appeal for Bitcoin and its competitors.
What do you think about it? Will Bitcoin hit $ 20,000 or is it set to drop again? Let me know yours in the comments.
As always, thank you if you made it this far, and see you next time!
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