Bitcoin has proved to be one of the most profitable assets to date. The technology behind Bitcoin, the blockchain technology, is proving to be instrumental in developing various industries. This, combined with many other factors, has increased Bitcoin prices. Owing to the highly increasing prices of digital assets, the recent decades are often referred to as the Bitcoin Era by investors worldwide. Let us delve deeper into the topic and understand why the prices of Bitcoin are going up again!
Previously broken resistance levels
A resistance level is a range of asset prices reflected on the graph, which is hard and often impossible to cross. It has been observed that there have been several resistance levels for Bitcoin in the past. However, Bitcoin has broken through the resistance again and again. Bitcoin experienced a hard resistance level in June 2019, when it reached a price of $14,000. However, Bitcoin successfully broke through the hard resistance, and its prices continued to grow. In November 2019, it finally broke through this resistance point, and the new resistance level was set at $20,000. Similar instances have been observed after 2019, but its prices continued to grow through the resistance levels. The chances are that the new resistance point will be surpassed by Bitcoin soon, and the rising prices of Bitcoin are just a precursor to that. This has encouraged the bullish behavior of investors towards Bitcoin, as the common sentiment regarding Bitcoin is that it will continue to push past the resistance levels for decades to come!
Inflation and how Bitcoin acts as a hedge against it
Inflation has been on the rise for a long time, with an average of 2% per year. Additionally, the spending capacity has been observed to be on the rise. These factors point towards the lowering purchasing power of several significant currencies worldwide. In this situation, people worldwide are looking for investment options that can protect their hard-earned wealth from losing worth. Bitcoins are among the safest bets for investors and common people looking for a hedge against inflation. Bitcoin acts as a pretty effective hedge against inflation, as it is based on a decentralized network and is independent of the economies of major countries in the world. This hedging quality of Bitcoins against inflation further adds to the list of reasons behind its increasing prices.
Adopted as a means of payment across various platforms
It has been observed that platforms worldwide have started to accept crypto payments in the form of Bitcoins. Paypal has announced the same, allowing its users to buy, sell and receive Bitcoins as payment from other Paypal users. This makes it easier for its user base, consisting of more than 350 active million users, to trade and store Bitcoins.
Investments from institutions
Owing to the hedging capacity of Bitcoins, it has been observed that many publicly listed companies have started converting their cash to Bitcoins. The volatile economical and political scenario around the world makes holding on to many fiat currency risky for companies. Thus, companies like MicroStrategy and Square buy huge amounts of Bitcoin to hedge their profits against inflation. MicroStrategy was reported to turn $450 million into Bitcoin, while Square was observed to buy $50 million worth of Bitcoin. Such investments are bound to pump up the price of Bitcoins notably. Thus, it can be stated that the institutional investments made by public companies worldwide are also responsible for the increasing prices of Bitcoin.
Other contributing factors responsible for the increasing prices of Bitcoins include the scarcity generated by its production cap. The total number of Bitcoins to ever exist stands at 21 million. It is stated that no more or fewer Bitcoins are to be generated, which makes the asset more scarce than everything that has come before it. In addition to this, halving is another phenomenon innate to Bitcoin, which ensures that Bitcoin does not face inflation. These two factors further contribute to the ever-increasing prices of Bitcoin. The profits generated by Bitcoins have seemed to make it more lucrative than gold and real estate. It is safe to say that the price of Bitcoin will continue to rise during the Bitcoin Era. However, no prediction has ever proved to be 100% efficient, and this prediction might prove to be inaccurate to an extent as well. However, most likely, the Bitcoin prices are bound to go even higher than the current resistance levels.