Bitcoin has been on a rollercoaster ride in recent years. Its price skyrocketed in 2017, reaching a peak of nearly $20,000 before plummeting in 2018 to below $4,000. However, since then, the price of the cryptocurrency has been steadily rising, and in 2021, it reached an all-time high of over $60,000. So, what is driving this surge in the price of bitcoin?
1. Institutional Investment
One of the significant factors contributing to the rise in the price of bitcoin is institutional investment. Over the past few years, many large companies and financial institutions have begun to invest in bitcoin. For example, in 2020, PayPal announced that it would allow its users to buy, hold, and sell bitcoin. Similarly, companies such as MicroStrategy and Square have invested billions of dollars in bitcoin.
The reason for this institutional investment is the growing acceptance of bitcoin as a legitimate asset class. Many institutional investors view bitcoin as a hedge against inflation and as a way to diversify their portfolios. Additionally, with the increasing adoption of bitcoin by mainstream companies, many investors see it as a safe investment option.
2. Limited Supply
Another factor contributing to the rise in the price of bitcoin is its limited supply. Unlike traditional currencies, which can be printed at will, the supply of bitcoin is hard-capped at 21 million. So far, only around 18.6 million bitcoins have been mined, which means that there are only around 2.4 million bitcoins left to be mined.
The limited supply of bitcoin makes it a scarce asset, which increases its value. As more people become interested in buying bitcoin, the demand for the cryptocurrency increases, driving up its price.
3. Increased Adoption
Bitcoin’s increased adoption is another significant factor contributing to its rising price. Over the past few years, more and more businesses have begun to accept bitcoin as a form of payment. For example, companies such as Microsoft, Expedia, and Overstock.com now accept bitcoin payments.
As the number of businesses accepting bitcoin grows, the cryptocurrency becomes more mainstream, and its value increases. Additionally, with the growing popularity of bitcoin, more people are becoming interested in investing in it, further driving up its price.
4. Government Stimulus
The unprecedented government stimulus measures introduced in response to the COVID-19 pandemic have also contributed to the rise in the price of bitcoin. As governments around the world have injected trillions of dollars into their economies, many investors have become concerned about the impact of inflation on traditional currencies.
Bitcoin, with its limited supply and decentralized nature, is seen by many as a hedge against inflation. As a result, many investors have turned to bitcoin as a store of value, driving up its price.
In conclusion, the rising price of bitcoin is due to a combination of factors, including institutional investment, limited supply, increased adoption, and government stimulus. As the cryptocurrency becomes more mainstream and more widely accepted, it is likely that its value will continue to rise, making it an attractive investment option for many investors.