Bitcoin is something of a remark as we wean into the new year. The asset is consistently breaking new highs, with other cryptocurrencies following in its wake. But this didn’t happen out of nowhere. Various factors contributed to this explosion. This article will break down the most prominent.
Cryptocurrencies, especially Bitcoin, are finally being recognized by experts in the financial space. The CEO of BlackRock started this trend, noting that the digital asset could compete with gold. From there, PayPal added crypto support to its services, acting almost as a Bitcoin exchange.
Another popular platform, Square Cash, had announced an investment of $50 million into Bitcoin. This company provides payment services to customers similar to Venmo. This includes traditional fiat as well as crypto trading. Such a streamlined service is huge for mainstream adoption.
Now, institutional investors are getting involved, pouring hundreds of thousands of dollars into the space. Every investment serves as another endorsement, likely leading other companies to follow suit. It’s a snowball effect - one that shows no signs of stopping.
Viewing it as a Hedge
Expanding on the “digital gold” trend, investors are viewing Bitcoin as a hedge. There’s no debating the global economic and political turmoil that spread in 2020. The COVID-19 pandemic raged and scared many, crashing economies, businesses, and more.
Investors are scared of relying on fiat currency. They’re not trusting governments to control their assets, so they’re moving to Bitcoin instead. Nobody controls the digital coin, after all. That use case is finally being realized.
The Tech is Here
When cryptocurrency first exploded in 2017, many of its promises were limited by the tech at the time. It seemed like a pipe dream, and the mainstream wasn’t convinced.
That has finally changed.
As of now, Bitcoin has improved its tech greatly thanks to projects like the Lightning Network. The platform can finally scale as it needs to.
Ethereum upgraded to 2.0, moving to a proof-of-stake consensus algorithm. This enables users to stake their assets on the platform, earning interest on their stake. The upgrade is also huge for the decentralized finance space. Moving traditional finance applications over to the autonomous nature of blockchain is quite appealing, after all.
Other altcoins are developing their platforms as well. As these projects receive more funding, their tech will only continue to improve.
There are only 21 million Bitcoin that can ever exist. That limit is hard-coded into the asset’s blockchain network. Because of this, there will be companies that can’t even own one - especially as the value continues to increase.
The fear of missing out is significant here. Companies, especially those of the institutional sort, don’t want to miss out. While this isn’t necessarily the healthiest way to get involved, it’s a very real one. When companies see Bitcoin’s price rising to the tens of thousands, the thought of missing that trend is too much to bear.
Many institutional investors have claimed lack of regulation prevents them from entering the crypto sphere. Fortunately, this is all about to change.
As of a recent policy, banks are now allowed to manage their own cryptocurrencies and blockchain networks. While this isn’t directly involved with Bitcoin, the move increases confidence in the tech, no doubt.
If the mainstream can trust banks to hold their digital assets, why not trust their funds in Bitcoin?
In this same vein, groups like Facebook and the Chinese government are developing their own stablecoins. Controversial as they may be, smart investors will pay attention to why this is happening and invest or pull out as they see fit.
Of course, to many crypto investors, this explosion is just the beginning. The technology has a long way to go before it’s scalable for everyone to use. That, and regulation needs to catch up as well. Until that day, however, we’ll see crypto slowly oozing its way into the public consciousness.
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