then the pandemic happened. Multiple rounds of unbridled stimulation spending by central banks shook Bitcoin from its price grogginess and strengthened its economic proposition as a store of prize. Its price coasted past the $ 20,000 record, set closely three years ago during a booming economy, in early December and has skyrocketed by more than 200 % since the beginning of this year .
meanwhile, cryptocurrency markets have jumped to $ 760 billion, a haircloth ‘s width away from their $ 800 billion valuations in 2017, moving up significantly up from their $ 185 billion market ceiling at the startle of this class .
- Bitcoin and cryptocurrency prices skyrocketed to new highs in 2020 as fears of macroeconomic instability drove investors toward new asset classes.
- Bitcoin was a major beneficiary as institutional investors and banks announced investments into the cryptocurrency and its trading ecosystem.
- However, the crypto ecosystem is still plagued by several problems, such as scams and low liquidity.
What Caused the Increase in Bitcoin Price ?
several developments created a perfective storm for Bitcoin and crypto markets to thrive during the second half of this year .
Chief among them was ( and continues to be ) central bank policy during the pandemic closure. Analysts have cited macroeconomic instability resulting from unbridled stimulation during the economic closure and depleted interest rates as major reasons for investors to put their money into Bitcoin. The cryptocurrency ‘s scarcity contrasts with the flurry of spending by cardinal banks around the earth. This monetary policy tactic could debase the measure of decree currencies and lead to rampant inflation .
institutional investors adopted a risk-on profile amid an economic environment marked by low-interest rates and fear of macroeconomic turbulence. In their search for investable assets, investors re-evaluated their master assessments of Bitcoin and bolstered its trade infrastructure .
Unlike Bitcoin ‘s 2017 price rise, when the chorus was largely negative, the complement this prison term around has been positive. The consequence is that some institutional investors are nowadays betting on Bitcoin. They were not the lone ones. Publicly listed companies like Square, Inc. ( SQ ) and MicroStrategy Incorporated ( MSTR ) besides invested in Bitcoin, the latter party making it a outstanding part of its treasury management scheme .
This year besides marked a seminal event in Bitcoin ‘s young history. Another Bitcoin halve slowed the rate at which Bitcoin is produced, thereby reducing the cryptocurrency ‘s overall issue in the market. broadly, the event is accompanied by a price bump. But it is a quantify of this foreign year that the consequence, which was supposed to have witnessed record inflows, barely produced a blip in crypto markets. inactive, the supply reduction helped set up the circumstances for Bitcoin ‘s late price leap .
Will This Time Be Different ?
vitamin a much as things have changed from 2017, they besides remain the lapp. Bitcoin price is still irascibly fickle. In the past workweek alone, the cryptocurrency has added roughly $ 100 billion to its overall market hood while whizzing past $ 29,000 .
That volatility is fat grind for criminals and scammers. Hackers and fraudsters had made off with funds totaling $ 1.8 billion by October from cryptocurrency markets and ecosystems. Ripple ‘s XRP ( XRPUSD ), the third gear biggest cryptocurrency by market capitalization, is besides being sued by the Securities and Exchange Commission ( SEC ) for an unlawful sale of securities .
Though a lesser issue nowadays while using larger exchanges, a fluidity trouble remains. Price disparity between crypto exchanges continues to exist. even as they have shed their inhibitions about Bitcoin and cryptocurrencies, institutional investors are inactive leery of committing amply. record inflows into the Grayscale Bitcoin Investment Trust ( GBTC ) are proof. The hope offers indirect photograph to Bitcoin for investors, saving them the hassle and cost of owning Bitcoin. In twist, they become crypto tourists, able to crest a rising trade and exit it when monetary value falls .
After multiple attempts at a Bitcoin exchange-traded fund ( ETF ), San Francisco-based Bitwise Asset Management besides jumped embark this year to launch a crypto index fund. While the proliferation of such investment vehicles offers institutional investors the probability to profit from Bitcoin and crypto, the seasonality of investments directed at them ensures that crypto ‘s liquid problem will persist .