TMCnet Feature
January 26, 2021

Dissecting The Recent Surge in Bitcoin Prices



Background

Investors all around the world, whether professionals or newbies, have turned their faces towards bitcoin, which has gained their attention following the recent upwards trend. In the wake of these trends, questions about this rapid surge have sprung up inside the heads of the people, and also whether this positive trend will be short-lived or will last for a longer time period. If you are looking for the answers to these questions, you have come to the right place. Sit back and read through this article to obtain answers for your queries.



Bitcoin system was created about roughly a decade ago, 12 years to be precise, as a revolutionary form of electronic payment system. This system operated on an Internet-based computing network, with complete autonomy, and no intervention by external third parties such as a person, regulatory institution or even a government. Bitcoins can also be traded on automated trading platforms such as bitcoincompass.io. In reality, the trading history of bitcoin is relatively short, with untested valuation procedures for evaluating the exact value of the asset, in both the short run and the longer run.

However, despite this prevailing uncertainty, investors and analysts of the cryptocurrency market have been keen in forecasting bitcoin prices in the longer run which range from $50,000 to $500,000.

Most recently, Bitcoin surged to a price of $40,000 per coin, increasing twice in value in the last 30 days and causing the total market value of all cryptocurrencies to cross the $1 trillion mark.

According to CoinDesk, world’s leading news platform for bitcoins and other digital currencies, Bitcoin soared past $38,000 last week on Thursday, confirming that this caused the total value of the whole crypto market to go beyond $1 trillion, making this the first such instance.

According to the data reported by CoinDesk, following are some of the reasons identified behind the rise in bitcoin prices:

  •  Increased demand from retail/institutional investors, as they see the bitcoins as a hedge against inflation. The cryptocurrency is considered to act as a protection from inflation since in the bitcoin network’s original programming, a total of 21 million bitcoins can be created and circulated. Hence a difference can be identified here with central banks which can print more money according to the policies and decisions. Large asset-managers for example Tudor Investment and Guggenheim Partners have stated the purchases of bitcoin on wagered prices via futures contracts on the CME exchange. Analysts and policymakers at JPMorgan, the largest investment bank in the United States recently forecasted the price of a bitcoin to reach $146,000 in the longer run.

  •  The decline in the U.S. dollar’s value in foreign exchange markets. In 2020, there was a dip of 6.8% in the U.S. Dollar Index – an instrument which enables the measurement and comparison of the U.S. Dollar’s value against other renowned currencies like the euro and Chinese Yuan. , slid 6.8% in 2020. In 2021 the values have been down again. That is vital for bitcoin, given the price of the bitcoins are generally denominated in U.S. dollars. Reasons behind this decline are thought to be the $3 trillion money printing done by the Federal Reserve during the last whole year, which equals approximately three-quarters of the total amount previously produced in the central bank’s history of 108 years.

  •  Retail purchases. Several investors are risking on bitcoin prices, and it’s become increasingly convenient for investors to purchase bitcoins, via large worldwide service networks like PayPal (News - Alert), which introduced cryptocurrency payment options last year. Strategists from ByteTree, a digital-asset firm observed a pattern during this week which showed that the blockchain data demonstrated a great concentration of bitcoin transactions in the amounts of $600 - the exact same amount as the American stimulus checks dispatched in the most recent coronavirus aid package in the United States.

A Final Word

According to the resources evaluated and analyzed, we believe that the aforementioned reasons are some of the causes behind the dramatic surge seen in the recent price of bitcoins. We do, however, understand that there must be other implicit as well as explicit underlying causes which probably caused this search and would appreciate to hear them from you. Share your insight on this matter in the comments below.

 

 

 
 
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