If you’ve been paying attention to the Bitcoin market, you’ll know it has been on a significant tear for the past few months. The asset started its impressive, meteoric rise in October following an announcement that PayPal will begin to incorporate it this year. Since then, it has been one milestone after another.
Currently, Bitcoin is trading at a little above $51,000. The asset has dropped drastically from its all-time high of $58,000, but the gains over the past few months have still been impressive nonetheless. Barring a dangerous market downturn, there is every indication that it could be gunning for the all-time high once more.
Gains coming in thus far
Bitcoin’s performance has left many racking their brains for an explanation. There are different pointers to think of for sure. There is the increased institutional adoption, which has seen the asset grow as an investment scheme. More large companies believe that Bitcoin can help them to hedge against inflation and the effects of the novel coronavirus pandemic, and holding the asset is their means of showing belief in it.
There is also the fact that more countries have been looking at the prospect of launching central bank digital currencies (CBDCs). These state-backed assets bring the benefits of cryptocurrencies to traditional assets, allowing citizens to access seamless and faster payments at cheaper rates. Considering that CBDCs themselves are built on similar technology as Bitcoin, interest in the leading cryptocurrency has piqued and more people are looking to understand why it works so well.
Where do we go from here?
With so much in store, it truly is an exciting time to be a Bitcoin investor. However, analysts and industry insiders are also looking into whether this rally can be sustained. Is it truly possible to have Bitcoin continue its strong performance over time and deliver greater gains for holders.
Interestingly, there are several pointers that suggest in the affirmative. Let’s look quickly at some of the possible signs:
Continued interest from institutions
Interestingly, it could be that one if the primary drivers of last year’s Bitcoin rally could lead the way for another resurgence this year, institutions are still looking into the viability of Bitcoin serving as a strong hedge asset, and it is undoubtedly showing signs of promise.
This year alone, we’ve seen commitments from Tesla (which bought $1.5 billion worth of Bitcoin) and MicroStrategy (which bought over $1 billion as well over two transactions). Several other companies have toed the line as well, although they might not have the same capital strength and capabilities as the two companies mentioned above. The point here is that more institutions could look to Bitcoin as the perfect asset to help guide them through the current storm. If that happens, there’s no telling how high the asset’s price could go.
Bitcoin tends to see an uptick whenever a new company commits funds to it. So, if the tradition holds, more companies getting in will lead to successive price increases and gains for investors all around.
The coming tech merge
Over the past few months, there has been a considerable merge between the tech space and the Bitcoin market. We already saw PayPal confirm its Bitcoin transaction and trading offering, meaning that the company will open its doors even more to the asset this year.
In 2021, however, there has been much more. Mastercard, the top credit card manufacturer and payment processor, also announced that it will accept Bitcoin transactions going forward. The company has explained in its mission statement that it isn’t exactly looking to spur demand for cryptocurrencies, explaining:
“It’s about choice. Mastercard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value”
Amazon has also opened job positions for engineers and developers willing to work with it on a digital currency in Mexico. This isn’t Bitcoin, but it shows that the eCommerce giant has cryptocurrencies in mind as it looks to chart a course forward following the exit of Jeff Bezos.
“We are looking for a leader to help us launch a new payment product starting with Mexico as our initial launch country. This product will enable customers to convert their cash into digital currency using which customers can enjoy online services including shopping for goods and/or services like Prime Video,” the company explained in the job posting.
Blockchain startups booming
Around 5-6 new crypto projects are entering the market every day starting from Jan 2021. It leads to the two positing outcomes for Bitcoin price bull run.
First, retail investors have to buy cryptocurrency (usually BTC and ETH) to take a part in new blockchain startups. So, an average person who want to buy some BTC at first time, face almost 10% slippage in price. For example, due to the Tokpie exchange data, a person who wanted to quickly buy Bitcoin with a bank card had to pay $56,140 per 1 BTC when its price was $51,090 on spot markets. It creates an additional demand and hype on bitcoin.
Second, newly coming blockchain startups usually run bounty campaigns and list them on platforms like BountyMarketCap tracker. So, any person could select most profitable bounties and get payed for doing simple tasks online.This is also escalating the overall crypto adoption worldwide and moves BTC price higher.
No matter how much Bitcoin rises, it still won’t be able to convince several investors until it receives approval and recognition from the government. Many have called on action to be made, and there are signs that the Biden administration will make progress on that front.
Recently, Hester Pierce, a Commissioner at the Securities and Exchange Commission (SEC), explained that increasing demand is putting more pressure on the government to act quickly on the crypto regulatory issue. Speaking with Reuters, Pierce said:
“It’s not only that there have been calls for clarity for some time and that a new administration brings the chance to take a fresh look, but it also is a moment where it seems others in the marketplace are also taking a fresh look.” The Biden administration has its work cut out for it, and it’ll be interesting to see how things play out at the end of the day.