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Five Key Factors Driving Bitcoin's Price Rise

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This time around, the reasons for the skyrocketing price of Bitcoin are quite different.

Original title: "Why Is Bitcoin Price Rising? Here Are 5 Key Reasons"

Original author: Scott Chipolina

Original translation: 0x13, Rhythm BlockBeats

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Summary

-The price of Bitcoin has continued to rise in recent months, and there are several reasons behind the surge.

-High profile figures and companies have expressed their support for Bitcoin.

- Other reasons include Bitcoin halving, which also directly affects the price of Bitcoin.

Bitcoin’s price topped $16,000 for the first time in three years, and it is currently trading at $16,081 at press time, A 28% increase in value compared to the past three months.

In March, the price of bitcoin fell sharply to its lowest point this year, touching $4,000. Since then, the price of Bitcoin has been rising rapidly, rebounding continuously, and has remained above the price of $10,000, and recently set a new high since the epic bull market of Bitcoin in 2017. This time around, however, the reasons for the skyrocketing price of bitcoin are quite different.

Why is the price of Bitcoin going up?

There are many reasons for the increase in the price of Bitcoin. Investments from large institutions such as MicroStrategy have led the way, and large companies such as Grayscale are also managing Bitcoin for their own clients. What's more, since Paypal started allowing people to buy and sell Bitcoin, it's now easier to buy Bitcoin.

The total supply of Bitcoin has also been cut in half, which is one of the reasons for the increase in the price of Bitcoin. In the second half of 2020, these individual factors combined to form an impressive Bitcoin bull market. It all starts with MicroStrategy.

MicroStrategy Effect

this year Between August and September, business intelligence firm and international giant MicroStrategy invested $425 million in Bitcoin.

Following MicroStrategy’s investment, Square also invested $50 million in Bitcoin on October 8, 2020—accounting for the company’s 1% of total assets.

After investing in Bitcoin, MicroStrategy and Square have gained a considerable profit of 46% and 53%, and now the two The company's bitcoins are worth $620 million and $76 million, respectively.

In recent months, these big names have also become the most staunch supporters of Bitcoin, and have publicly expressed their comparisons many times Kudos to Bitcoin.

MicroStrategy CEO Michael Saylor has been publicly praising Bitcoin. When his firm first announced its interest in investing, Saylor described bitcoin as “digital gold,” a cryptocurrency he said was “harder, stronger, faster, and smarter than anything that came before it.”

Similarly, Square’s CFO Amrita Ahuja said, “We believe that Bitcoin has the potential to become a more A universal currency.” He added, “For a company that is building products based on a more inclusive future, this investment is a solid step in that journey.”

These investments and their public admiration for Bitcoin appear to have started after MicroStrategy’s first investment, and are thus cited by Quantum Economics ) bitcoin analyst Jason Deane called the "MicroStrategy effect." Deane added that these moves "set off a frenzy of institutions snapping up more bitcoin."

Top listed companies and their Bitcoin holdings

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These remarks were accompanied by public support for Bitcoin by others in the investment community.

Public support for investing in Bitcoin

Bitcoin's good performance in the second half of 2020 has led some mainstream businesses to embrace the cryptocurrency.

JPMorgan Chase is the best example of this. In 2017, JPMorgan CEO Jamie Dimon labeled Bitcoin a "fraud." And in October of this year, the investment bank said that Bitcoin is firmly competing with gold, and "the potential long-term upside of Bitcoin is considerable."

Paul Tudor Jones, a titan of the hedge fund industry, likens buying bitcoin to an early investment in a technology company. “Bitcoin has a lot of similarities to early tech companies, unfortunately I didn’t realize that until I saw your show and saw how many people were paying attention to Bitcoin.” Jones on CNBC’s Squawk Box Said (the partner show CNBC Fast Money is also particularly bullish on Bitcoin).

More importantly, Stanley Druckenmiller, a billionaire investor who previously dismissed Bitcoin, said that this The famous cryptocurrency may be better than gold. “I own many, many times more gold than I own bitcoin, but frankly, if gold is going to pay off, bitcoin will pay off more than gold,” Druckenmiller said this month.

However, while these investors are praising Bitcoin, many investment institutions are also imitating them to invest in Bitcoin.

Grayscale Investment and Bitcoin Custody

Grayscale Investments is an asset management firm that is leading the way in providing custody services to wealthy Bitcoin holders.

Last week, Decrypt reported how Grayscale Investments acquired more than 40,000 bitcoins for its clients. At the time of writing, those bitcoins were worth more than $600 million. Grayscale isn't the only player, though.

Grayscale and mobile payment service CashApp bought a total of 85,000 bitcoins, worth about $695 million. During the same period, in Q1 of 2020, a total of 163,800 bitcoins were mined, which means that the two companies bought bitcoins equivalent to about half of the total bitcoins mined in that quarter.

The numbers have sparked fears that bitcoin will soon be in short supply as so much of the cryptocurrency is being enriched Investors and giant corporations are snapping up, not ordinary people.

Bitcoin supply halved

Bitcoin halving is likely to have an impact on the price of Bitcoin. The Bitcoin halving occurs every four years and cuts in half the amount of coins miners earn for adding new blocks to the Bitcoin blockchain. So starting in May, the amount of Bitcoin mined is only half of what it was in the previous months.

“With the Bitcoin halving in May, this supply flow was cut in half, which meant miners got There are fewer bitcoins. This could lead to a shortage of supply and thus an increase in the price of bitcoin,” said Elias Strehle, a researcher at the Blockchain Research Lab.

This is fundamental economics and is not simply limited to Bitcoin mining, or the wider cryptocurrency industry. If demand stays the same, but supply falls, that puts upward pressure on prices.

When fruit is scarce because of a bad harvest, the price of the fruit goes up,” said Ingo Fiedler, co-founder of Blockchain Research Lab.

All of these reasons have had a positive impact on the price of Bitcoin over the past few months, but there remains one key factor,. This factor has also contributed to the massive popularity of Bitcoin.

PayPal and Cryptocurrency

The international payment giant PayPal announced in October this year that it will launch a cryptocurrency buying and selling function on its platform. It then confirmed on Nov. 13 that bitcoin is now available to all of its customers — and plans to bring the feature to Venmo.

This launch includes the ability to buy and sell four cryptocurrencies, namely BTC, BCH, ETH and LTC.

Because the giants in the financial industry such as MicroStrategy, Square, and Grayscale Investments have made recognition of Bitcoin as a legal asset Thanks to its contribution, the arrival of PayPal has brought greater hope for Bitcoin to hit the mainstream.

“I just bought bitcoin on Paypal, the operation is super easy. Bitcoin will become mainstream like this.” One Said a Twitter user who goes by the pseudonym BitcoinBF.

PayPal used to question Bitcoin's suitability as a currency, but now, It is also one of many giants investing in Bitcoin. And as they invested together, the price of Bitcoin rose sharply.