Changes in the Bitcoin Prices
July 2010 marked Bitcoin release into the global circulation at a 0.0008 USD value per BTC. By 2013, it had reached a 1,164 USD high. However, due to its labile nature, its value chipped away, reducing to 245 USD. 2017 alone, it skyrocketed from USD 1035.24 in January to USD 18,940.57 in December. Then it dipped to USD 3,190, a new low in 3 years.
March 2020, in the midst of the COVID-19 pandemic, it was at USD 4,841.67 and finished the year strong at USD 29,402.64. Talk about a comeback. 20th February 2021, it rose to a 57,469.95 U.S Dollars new record. Despite its volatility, Bitcoin has shown its tenacity and continues to do so to date.
Factors Fueling Bitcoin Price Ascent
The devastating effects of Coronavirus on the economy led to the stimulus package provided by the government. Consequently, inflation will be inevitable and thus reducing the people’s purchasing power. Institutions thereby find it a good idea to invest in Bitcoin to act as insurance against this. According to a research study by Evertas, by 2025, 90% expect that institutional investors will invest in crypto assets like Bitcoin.
The only thing that was holding them back was how to ensure against the risks involved. This is being mitigated by cryptocurrency custody services and a rise in crypto-insurance companies. This has ensured trust in Bitcoin for bullish institutions and companies. They are therefore buying Bitcoin in large amounts as they see its potential upside.
In fact, on 8th February 2021, Elon Musk’s company, Tesla, bought USD 1.5 billion in Bitcoin. The investment bank JP Morgan has also predicted a USD 600 billion demand to occur in the future. Big companies like Shopify and PayPal are also accepting it as modes of payment.
Bitcoin mining is capped at 21 million coins. This is whereby miners verify a block's transactions to prevent double-spending. December 2019, there were 18.1 million bitcoins in circulation. The last Bitcoin is set to be mined in 2140. This solves the inflation problem, making it very lucrative for investors.
What causes Bitcoin Prices to fall
Could 2021 be just another bubble? With Bitcoin’s uncertainty, it could as well be. When it started, people invested in it because of fear of missing out 'FOMO.' For instance, in the 2017 bubble, there was a viral effect surrounding it. However, there was no proper understanding of what its potential was. That is what creates bubbles, especially in this case whereby Bitcoin is not backed by the government or issued by a Central bank. Eventually, all bubbles pop. Hence the prices fell in the end.
Bitcoin also faces immense competition from other tokens. For example, Ethereum provides a diversified blockchain use. Other altcoins on its tail include Litecoin, Bitcoin Cash, among others. This helps keep the Bitcoin price down. However, since it is very popular, this gives it the power to dominate.
Also, it’s clear that the technology Bitcoin runs on, blockchain could be used in many other ways. However, Bitcoin’s scalability has become an issue. At the moment, its software is able to process 3 transactions per second. As it grows, this will become an issue, and the slow transactions will make investors veer towards other cryptocurrencies. This will lower its value.
It is clear that bitcoin is no longer in the shadows. Used to purchase weapons or drugs as it was when starting out. After surviving and thriving the COVID-19 pandemic, all the price drops, and bad press, it’s clear that Bitcoin is here to stay. With this data, prices will surge and go down but its value will only continue to increase. This will depend on how quickly the masses adopt it.