Why is Bitcoin Price Suddenly Going Crazy? We Have Some Theories

Why is Bitcoin Price Suddenly Going Crazy? We Have Some Theories

In January 2020, the index price of a Bitcoin was $9,545.98. Less than eleven months later, the price of the coin is now worth well over $18,000.

In a year slowed down by a pandemic that plunged the economy of various countries, various investors began to see cryptocurrencies, especially Bitcoin, as an alternative currency.

The fall in the value of gold from an all-time high of $2,072 per ounce. In August 2020 it surged to $1,885. November also contributed to increasing acceptability of “Bitcoin as a growth asset that can perform strongly in an era of low returns from government bonds.”

Institutional adoption plays a role

For example, between October and November when Paypal announced that it would open a network with cryptocurrencies in 2021. The price of bitcoin had increased by almost fifty percent since the announcement.

The decision of the company to also allow its customers to transact using bitcoin gave more credibility to its position as a major asset in cryptocurrency.

One long term effect and implication of the acceptance of Bitcoin by PayPal is there will most likely never be a shortage of buyers for the currency. A factor that will always shape investors’ decision-making.

The decision of another mainstream company, Square, to accept Bitcoin as a viable payment option also boosted its increasing worth. Not only that, the company’s purchase of $50 million worth of Bitcoin in a single market day. The purchase forced people take notice of the coin as a viable means of wealth storage.

Fear of Fiat currency devaluation pushes more investors to Bitcoin

One of the major reasons that has also led to the massive increase in the value of Bitcoin is the fear that the US dollars could suffer a devaluation. Mainly due to the intention of the government to print more money as a stimulus package for the economy in the coming weeks.

If this record making stimulus package is released into the economy by the government and central banks. As a result, the value of fiat currencies would definitely be suffering a huge blow. The package would inevitably lead to the devaluation of these currencies.

Interestingly, governments and central banks appeared determined to inject this stimulus package into the economy. While this may be able to solve the current economic crisis, some analysts believe this is a win for cryptocurrency, Bitcoin especially.

Investors would be forced to seek alternative means of storing their wealth when this happens. And presently, the only available viable option for them would be to invest either in Gold or in Bitcoin.

But with Bitcoin having shown over the few last months that it’s a better alternative currency. BTC’s primed to become the biggest winner as demand for the token would increase. The increase would therefore continue to lead to the growing price of the coin.

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