The concept of Bitcoin came after the financial crisis of 2008. Since then the cryptocurrency has grown at a tremendous rate. Although bitcoin is still an extremely volatile investment, they have a very unique price trend.
Bitcoin: Journey up to 2020
Satoshi Nakamoto designed bitcoin for use as a medium for daily transactions, says Investopedia. It can circumvent the traditional banking infrastructure after the 2008 financial collapse. While the cryptocurrency has yet to gain mainstream traction as a currency, it has begun to pick up steam through a different narrative. Investors in the US and Japan have conflicting views on investing in financial assets.
Bitcoin investors have always experienced a roller coaster ride. From daily volatility to problems such as scams and fraudsters due to lack of regulation, there have been many instances when the price has declined and inclined. Adding to this, there have been times when bitcoin has outpaced its usual price fluctuations.
In 2011, Bitcoin’s price jumped from $1 in April of that year to $32 in June, a gain of 3200% within three short months. That steep ascent was followed by a sharp recession in crypto markets and Bitcoin’s price bottomed out at $2 in November 2011. This was followed by another bubble in the year 2013.
In 2017, there was a hike in price from $975.70 on March 25 to $20,089 on December 17. This helped bitcoin create a spotlight in the mainstream media. By the end of December, it was quoting $7,112.73.
What Happened in 2020?
In spite of the upheaval due to the outbreak, bitcoin gained in 2020. It reached an all-time high of approximately $20,000 in December 2020 and is gaining since then.
A major reason behind this price rise is the entry of institutional investors. Most common are pension schemes, university endowment funds, and investment trusts. However, this was not the case in 2017.
The Conversation lists big names such as billionaire investor Paul Tudor Jones and insurance giant MassMutual among bitcoin backers. Even former naysayers like JP Morgan now say that bitcoin could have a bright future. This all helps to increase trust in the cryptocurrency and indicates that it is becoming more mainstream.
Bitcoin has also been backed by a few large consumer-facing payment names. For example, PayPal allows customers to buy, sell and hold bitcoin directly from their PayPal accounts.
Bitcoin mining and price fluctuation
The upper cap to the number of bitcoins in circulation is 21 million. To date, 18.5 million are mined and in circulation. This makes the investment limited and in turn, increases its store value. You can consider bitcoin similar to precious metals.
The bitcoin miners receive rewards for creating new blocks and recording transactions in the network. But every four years, the reward keeps reducing due to halving. This has a direct impact on its price. The last halving occurred on May 11, 2020.
Even though it is difficult to predict the future of digital assets, many analysts are optimistic. They opine that cryptocurrencies have the potential to become a mainstream asset class.
The Final Takeaway
One can comfortably believe that the COVID-19 pandemic gave cryptocurrencies a perfect environment to rise from the ashes. There are a lot of analysts who are making bullish predictions. Irrespective, investors should be prepared for a sharp decline or extreme volatility anytime.