Although Bitcoin does not have a very long trading history, with the Bitcoin price rise in recent days, the market volume has exceeded 771 billion USD and is positioned below the Tesla of 773 billion USD in the market cap ranking. The Bitcoin price, on the other hand, saw its historic high of 40,000 USD, very soon after crossing the 20,000 USD mark for the first time. In the rally that has been going on since October, the Bitcoin price has quadrupled, breaking record after record. Bitcoin price We have listed the factors that affect the Bitcoin price especially for beginner investors who are curious about the reasons why it rises so fast.
Why is the Bitcoin Price Rising?
Limited Supply
Bitcoin is seen as a means of protection against inflation by individual and institutional investors due to its limited supply of 21 million units
. Especially during the pandemic period, the printing of money by central banks to keep the economy alive had an inflationary effect and traditional currencies lost value. Investors who wanted to protect their savings turned to Bitcoin as an alternative.
Institutional Investors Buying Bitcoin
Recently, many institutional firms have added Bitcoin to their investment items as part of their capital management strategies. These firms say that behind their institutional Bitcoin investment are inflation reservations and the low returns offered by other investment assets. For example, Microstrategy has invested 70,470 Bitcoins worth $2.2 billion and Square has invested 4,709 Bitcoins worth $50 million.
Depreciation of the US Dollar
The US Dollar Index, which gauges the value of the dollar against major world currencies such as the Euro and the Japanese Yen, lost 6.8% of its value in 2020. The reason for the dollar decline is the Fed’s $3 trillion money supply in 2020, which is about three-quarters of the amount of money printed in its 108-year history. Since the price of the cryptocurrency is mostly denominated in the US dollar, the depreciation of the dollar has been an advantageous situation for Bitcoin.
Discourses Supporting Bitcoin Investment
Bitcoin’s positive trajectory in the second half of 2020 has caused some big names to talk reassuringly. Jamie Dimon, the CEO of US-based JP Morgan, one of the most reputable banks in the world, described Bitcoin as a fraud in 2017, but in October 2020, contrary to this statement, he said that Bitcoin is digital gold and its potential long-term return cannot be ignored. In its report, JP Morgan predicts the price of Bitcoin at 146,000 USD. Similarly, billionaire investor Stanley Druckenmiller, who is very cautious about Bitcoin, is among the names that have recently said that Bitcoin can be a better investment than gold. On the other hand, it is worth noting that Citi Bank has valued Bitcoin at 300,000 USD in the report it has published.
Being the First Crypto Money to Come Out
Bitcoin is also distinguished from other cryptocurrencies due to being the first cryptocurrency to be launched and the market leader. With a market cap of 771 billion USD, it is almost 5.5 times the size of Ethereum, which comes in second place with a volume of 141 billion USD. This causes it to be seen as a safer haven for new crypto money investors than other crypto coins.
