At the end of 2020 and the beginning of 2021, the bitcoin’s price has seemed to rise more and more. But do you know what factors or things are driving its growth? It has been found out that there are a couple of factors that result in the increased value of bitcoin. Bitcoin has currently broken a resistance level where investors believe that there is an upside level that will continue. The inflation period is arriving, and investors across the world are investing their hard-earned money in safe-haven assets. Companies and payment applications are coming forward and adopting bitcoin, which will ease people’s access to cryptocurrencies.
Even the trading companies are purchasing bitcoin, which depicts a great level of confidence and appreciation of bitcoin as an investment asset. The history of bitcoin shows that its value has extremely fluctuated, and it is crucial to be careful while investing in it. Trading bitcoin by just click here here is simple but make sure to learn about fluctuating market of bitcoin.
Resistance of bitcoin in the previous decade
In the past decade, bitcoin has experienced volatile troughs and peaks at different times. The last peak of bitcoin was in June 2019 when its price reached $14000, but it experienced resistance and wasn’t able to trigger the bull market, and its value reached down to $3800. In early October, the resistance point of bitcoin was again tested to make it fall, but it pushed its market and reached $14000 again and continued to grow.
This was important because it is expected that the next resistance point of bitcoin will break all previous records and reach $20,000. But many investors became bullish, which lead cryptocurrency to retest its price again and push it more than the previous time. This speculation led to an increase in the value of bitcoin.
Inflation period and rush towards investment assets
One another reason behind the rise in the price of bitcoin is the increasing inflation. It has been noticed that the level of inflation is increasing, and it is decreasing the purchasing power of people. In order to hedge against the increasing inflation in the market, most people are treating from fiat currencies. They are rushing towards safe-haven assets that are seen to appreciate in value.
In general, the assets that provide shelter to investors to avoid rising inflation are the less volatile and scarce assets at the same time. These investment assets are known as safe-haven assets that include cryptocurrencies, precious metals, and stocks.
As discussed, Bitcoin is considered a safe-haven asset. Also, by looking at the current situation of the covid-19 pandemic and economic climate, people are shifting to digital currencies and believe in holding less physical money and be hedged besides the wild market swings. Recently, institutional investors and publicly traded companies have started to convert regular money or cash to bitcoin, which is a secure store of value. It has been noticed that some of the publicly traded companies have converted around $400 million worth of cash to bitcoin in their treasury.
Not only one but multiple companies have followed this trend of converting cash in their treasuries. This is because there is a great sense of confidence amongst investors and companies that bitcoin will serve as a great safe-haven asset and a great store of value.
Stock-to-flow model and halving process
The main reasons behind the increase in value of bitcoin are the two main attributes that are intrinsic in its structure that include the halving process and stock-to-flow model. There is a halving process in the bitcoin protocol that the reward of mining bitcoin will be halved every four years. There are only 21 million bitcoins that ever exist which means the supply of bitcoin is static and can never be increased or decreased.
The price of bitcoin follows the stock-to-flow model ratio where it is expected that its growth will continue in the future, and at the end of 2021, bitcoin’s value will reach approximately $100,000.
These are some of the factors that drive bitcoin’s price. Today, people are highly investing in bitcoin because it is a safe-haven asset, and they don’t find any other asset stable like bitcoin.