Bitcoin has been in the news a lot again recently. The most popular cryptocurrency has recently hit a spectacular new record of over $ 48,000, and investors can no longer afford to ignore the digital cryptocurrency. But what exactly is the reason for this burst of the Bitcoin price?
The main cause of the recent Bitcoin bull run is the massive influx of institutional funds. Bitcoin is no longer a niche technology used by a small circle of computer experts – it is a serious investment that major banks, hedge funds, insurance companies and other financial giants are in high demand for.
In 2020, institutional investors have bought massive amounts of Bitcoins. The most commonly reported was the purchase of $ 250 million worth of BTC by US company MicroStrategy Inc., which increased its position in BTC by an additional $ 125 million soon after.
Currently, 20 listed companies hold Bitcoin, and many more have invested in it indirectly through outside companies. Most of these companies bought BTC in 2020, which was the main force pushing the Bitcoin price higher.
Unlike retail investors, institutions are not interested in short-term speculation but intend to hold Bitcoin on their balance sheet for a long time. Not only does institutional money pump up the BTC course, but it also makes quick corrections less likely.
Adoption by technology giants
Recently, all Bitcoin news focused on Tesla’s purchase of $ 1.5 billion worth of BTC. The US electric car company revealed that it has not only invested in Bitcoin but also plans to accept BTC payments for their products in the near future. Tesla’s announcement caused the Bitcoin price to rapidly rise by more than 15%, hitting a new all-time high of more than $ 48,000.
Tesla isn’t the first tech giant to adopt Bitcoin. In October 2020, PayPal announced its entry into the cryptocurrency ecosystem. Users of one of the most popular payment processors in the world will soon be able to easily buy, sell and store digital currencies. Just like with Tesla, the announcement of PayPal gave the Bitcoin price a huge boost.
Obviously, Tesla and PayPal will not remain the only companies to use Bitcoin for long. Experts are starting to wonder which tech giant will follow in their footsteps first. According to a recent report published by an analyst from the Bank of Canada, Apple could be the next big company to enter the Bitcoin ecosystem, which would certainly lead to another spectacular rise in the Bitcoin price.
Bitcoin as digital gold
There is one more thing that contributed to the rise in the Bitcoin price, almost as much as its institutional and corporate importance: Covid-19. The pandemic is causing widespread lockdowns, economic stagnation and rampant money creation by politicians and central bankers.
Inflation is on the rise and confidence in fiat currencies is declining. Normally, in times of economic uncertainty, investors would turn to gold as the best safe haven, serving as a hedge against the devaluation of traditional money. But something unprecedented has happened: instead of buying gold, more and more investors are deciding to buy Bitcoin.
Comparisons between gold and BTC are becoming more common, and many experts believe that Bitcoin can replace gold as the most popular safe haven. Like gold, Bitcoin is a deflationary asset with a low correlation to traditional investments such as stocks. But unlike gold, Bitcoin is extremely cheap to store and transfer, which makes it very attractive to investors.
The future of the Bitcoin price
When it comes to future forecasts, a continuation of the trend from 2020 seems most likely. Institutional demand for BTC continues to grow, and experts think what we’ve already seen was just the beginning. Other tech giants will almost certainly follow Tesla and PayPal’s lead, and increasing government spending related to the coronavirus will make BTC an increasingly attractive alternative to traditional currencies.
The situation currently looks extremely optimistic and predictions that the Bitcoin price will reach USD 500,000 in the near future do not seem outrageous anymore. Everything points to the continuation of the current uptrend, and it is hard to imagine anything that could bring the Bitcoin price to the level of just a year ago.