Bitcoin is rising- rapidly. In the past few weeks, it seems to break its all-time high again and again. The new height achieved is $28,400. Yes, you read it right, it is starting to test the $30,000 barrier. At the start of December, it had already broken its previous records and crossed $19,000.
So what actually happened in the space of a month that has sent the largest cryptocurrency spiraling upwards?
Falling Interest Rates
In 2020, everything seems to be circling the COVID-19 pandemic. The virus has held the global economy and human population hostage as it wreaks havoc. Governments around the world have scrambled to impose lock downs, shutting down all but the most vital of industries and confining people to their homes as the deadly disease took its toll.
One of the largest economical steps taken, is the reduction of interest rates by central banks. People who had invested in savings accounts suddenly realized that they were being given too low profits for their fiat deposits. Bitcoin was a natural selection as the rising value gave a yield unparalleled.
Many countries started to print more currency notes to create money in order to aid the economies. Trump’s administration alone doled out $1.1 trillion. The sudden increase of supply meant that internationally, fiat became weaker than ever. Bitcoin, with its deflationary economics, began to be increasingly sought.
Large Scale Investors and Adoption
Bitcoin, good as it is, has always faced a very low level of adoption and big market players have always stayed clear of it, citing it just another fad. This has changed in this year. People from the likes of BlackRock have accepted that Bitcoin has the potential to replace gold. Payment processing PayPal has started to accept and store Bitcoin, potentially opening access to hundreds of thousands of people. Coinbase, the largest crypto exchange in the world, has even decided to go public, attracting further investors’ attention.
Bitcoin seems to be unfazed and growing exponentially. However, the truth is that the asset is now largely overbought and due for a correction. If the trend of 2017 are to be taken into account, it can lead to a massive crash over the news few months, even weeks.
There are many models that predict that Bitcoin is not going to give up and keep rising in value. How much will it rise is the whole debate. Short term outlook is an imminent crash, with long term predictions pointing towards a rise in value in the $40,000 to $60,000 bracket- maybe even higher.
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