Bitcoin, since its inception back in 2009, has significantly soared in value. Over the past decade, it has evolved from a fringe obsession, which was viewed as an alternative way to conduct business outside the traditional financial system, to now being seen as an asset akin to private equity. It also hasn’t hurt that the price of a single unit of bitcoin has gone from almost negligible to over $30,000 in that period and is continuing to rise.
The value of Bitcoin surged almost 16% to as high as $38,600 before paring gains while the equity markets in the US dropped into the red. This rise comes after a few rollercoaster weeks for the value of Bitcoin. It managed to reach a new record high of almost $42,000 on January 8th after plummeting to below $30,000 just a week later.
The digital coin rallied overnight after Elon Musk, the business magnate that founded SpaceX and Tesla, tweeted “#bitcoin” to his legions of followers after many traders were restricted from transacting some of their favorite stocks.
However, Bitcoin is definitely no stranger to bouts of speculative mania due to its highly volatile nature. Everyone’s favorite cryptocurrency managed to close 2020 with a growth of staggering 200% over just 12 months alone. In 2017, Bitcoin hit a record high of $20,000 which was the highest it had ever been since it was introduced by Satoshi Nakamoto, the mysterious entity responsible for the creation of Bitcoin. The bitcoin bubble unfortunately burst in 2018 after its value plunged significantly losing about 80% of its value. But despite such a serious blow, it has always managed to come out on top.
Bitocin is the tulip-mania that refuses to die, with a speculative frenzy that keeps on coming back for more. There are a number of reasons why Bitcoin manages to stay alive after steep plunges.
Why It Keeps Coming Back?
Bitcoin has a decentralized nature which essentially means that it is not controlled by any third party such as banks or government that can interfere between transactions or “freeze” assets. This also cuts down the transaction costs to a minimum appealing to the crowd looking for a cheaper alternative. Because the whole system of Bitcoin is pseudo-anonymous, its users can enjoy a significant amount of privacy in their dealings.
Moreover, Bitcoin acts as a hedge against inflation much like gold. This has even given rise to speculations about Bitcoin potentially being a future replacement for gold. Since there are only a limited number of Bitcoins in existence, capped at 21 Million, the cryptocurrency is able to retain its value despite worrying economic conditions. As bitcoin becomes scarcer, the more its value will drive up. This makes Bitcoin a terrific investment opportunity.
Another key factor in its demand is the availability of tools to help investors trade Bitcoin. Trading a highly volatile cryptocurrency is no child’s play and decisions have to be taken by keeping a number of important elements in mind. For a novice crypto investor, first steps in the crypto world used to be daunting. However, the availability of trading bots such as the Bitcoin system, has changed the trading game for beginners and seasoned investors alike.
Lastly, the increasing interest and support of institutional investors such as Mike Novogratz, Paul Tudor Jones, and Alan Howard has greatly helped the narrative of investment in bitcoin among potential investors. Large institutions like PayPal, Microsoft, Square, etc. have also jumped aboard the bitcoin bandwagon, allowing their users to make or accept payments through Bitcoin.