Bitcoin is back in force and many are speculating that the COVID pandemic is the main reason for it. It might be true that the cryptocurrency is finally fulfilling its promise as a store of value, but is that all that‘s going on there? We have to consider things like momentum and the different stimulus plans proposed by governments around the world. We also have to consider the influence of outside institutions. Let’s take a closer look at what could be pushing Bitcoin’s price up at the moment.
Institutional Buyers
Bitcoin holders have been talking about institutional money getting into Bitcoin for buyers, but it was never enough to really move the needle. However, more institutional investors are trying to use Bitcoin as an edge against inflation and major players have been making moves lately.
Big asset managers such as Guggenheim Partners and Tudor investments have both announced that they were invested in Bitcoin either directly or through future contracts. You even have old established firms like Morgan Stanley being openly bullish about Bitcoin. JPMorgan Chase analysts also predicted that Bitcoin would reach over $140,000 over the next years, which doesn’t hurt.
In short, institutions are finally starting to realise the value behind Bitcoin and are betting big on it. With only 21 million coins in circulation, Bitcoin is deflationary vs fiat, of which the supply can be contracted or expanded based on a vote.
Accessibility
Another factor that many overlook is how much more accessible Bitcoin is to the general public. Stable coins allow them to move between cryptocurrencies more easily while still getting the stability of an underlying asset like the US dollar.
People are also much savvier about Bitcoin and cryptocurrencies these days. If you want to get involved and learn more about trading Bitcoin, you can check out this beginner's guide to trading. You’ll learn everything to get started such as what affects market fluctuation, how to use a trading platform, and a few trading strategies that you can try.
The US Dollar’s Decline
We cannot speak about Bitcoin without speaking about the US dollar, since Bitcoin prices are usually denominated in the currency. The dollar has seen a drop of about 6.8% on the global markets in 2020 and keeps on dropping. This may be caused by the massive 3 trillion and counting that the Federal Reserve printed for stimulus packages. That’s about 75% of what the Federal Reserve has printed in its 108 years of existence. The whole march on the Capitol fiasco also didn’t help the US’s image on the world stage and its leadership role globally.
Many observers are also expecting major spending under this democratic-run administration, which could add to deficits for years and further push the dollar down against other currencies. This will make Bitcoin more attractive to international sellers as a result.
As you can see, there are many factors that may be behind this sudden rise and interest in Bitcoin. We still don’t know what the future holds, but a bullish trend seems to be the most plausible scenario.
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