Cryptocurrencies as a novelty among financial assets have captured investors’ attention once again as Bitcoin saw its price go beyond $59K. Currently priced at $59,224. 51, it is one percent or 1 of the total depend on the number of species identified a year before. Vastly up by 75% in the last 24 hours. It still holds the position as this created by commanding more than $1trillion in market capitalization – it is hence the largest digital asset. Exceeding 16 trillion, it is confidently in the ranks of the world’s largest cryptocurrency.
What has been behind the recent Bitcoin’s movement? As shown in the recent one month chart below the price of 1. Thus, 75% might seem relatively moderate, averaging, however, the rather intensive market operations. Hence, the twenty-four trading hours turnover increased to $27 billion SEVEN billinois increase equivalent to 23%. 37% increase. This rise in volume compared to the organisation’s market cap proves the rising investor’s interest that has been approved by increased trades with the volume-to-market-cap ratio at 2. 32%. This is an indication of the fact that investors are again loading up on Bitcoin, perhaps to protect against conventional equity markets, or as the result of new macro signals.
The most valuable asset that can be mentioned among the benefits of Bitcoin is that it is limited in availability. Current, it has a Circulating Supply of 19. $1,453 was Bitcoin with 74 million BTC, which is 94% of the total issuances; thus, scarcity remains the core business of Bitcoin. The circulation limit of Bitcoin has been put at 21 million Bitcoins unlike traditional floating currencies that are backed by central authorities and can be produced ad hoc. This is because as the number of bitcoins created gets closer to a fixed limit, scarcity has emerged as one of the key value-propositions, given that more people are waking up to the fact that the opportunity to acquire a large quantity of bitcoin at once is quickly closing.
Bitcoin market capitalization in terms of fully diluted value that may in circulation at some point in the future, ranks at $1. 24 trillion. This metric give a long term perspective on the value that can be expected to be given to Bitcoin. They imply that had all bitcoins in circulation today, its market cap would even surpass the present $1. 16 trillion.
But what is driving this Bitcoin price appreciation now? This is so for several reasons. First, people have been investing in Bitcoin as an inflation and economical risk hedge. For continued high alertness in inflationary factors coupled with geopolitical risks, and the shift in monetary policies, investors are seeking for options that they can hold as a store of value. This makes it appealing as compared to fiat currency which is enshrined by its issuers for regular inflation. While global central banks keep on pushing more printed money into their economies, Bitcoin offers the very opposite: deflation.
Also, Bitcoin has been gradually getting institutional adoption. Large banks, funds, and companies have been gradually including Bitcoin as an investment. Certain categories of institutional investors treat Bitcoin as a kind of “digital gold” – an asset whose main function is to preserve the purchasing power and even increase in value during economic instability. This institutional interest is manifested in increased trading volumes of shares as large undertakings come into the market with large capital.
Another reason that we see Bitcoin to continue charting an upward trajectory is some related technological advancement in the crypto space. Through the release of the faster and cheaper Bitcoin known as the Bitcoin Lightning Network has proved popular to everyday users. Lightning Network work to eliminate one of the limitations that has been leveled against Bitcoin, namely scalability. Through the use of network it facilitates off-chain transactions to ease the burden of traffic through the main Bitcoin blockchain and also be more affordable and faster. This has led to increased use of, and demand for Bitcoin; the latter reversing and increasing at the same time thereby placing upward pressure on the price of Bitcoin.
In addition, the growing number of Bitcoin ETFs in different parts of the globe, especially in North America, has provided an entry to the more conventional investors who accord high priority on approved financial investment products. With ETFs, investors can get returns on bitcoin investment without having to understand the basic workings or even having to own Bitcoin.
On this account, it is also worthwhile to pay attention to the fact that Bitcoin is used by some businesses and countries as a reserve currency. With such constantly looming threats as hyperinflation and devaluation of local currency in some EMs, Bitcoin is hedged not only directly by individuals but also by governments and corporations. Some countries like El Salvador have adopted Bitcoin as legal tender and several companies are adopting to hold bitcoin as their balance sheet.
Thus, it is necessary to note some of the risks connected with the usage of Bitcoin and its recent rise is good news for investors. Compared to the traditional stocks and other assets, a bitcoin is still highly priced and may experience a high fluctuation within a short period. Another important factor residing here is the regulatory concerns since governments still have not defined the methods of regulation for the cryptocurrency. Negative regulations or crack down by governments in various countries may determine the future price of Bitcoins.
Therefore, four main reasons have informed the increase in Bitcoin price to $59,000; these are; limited supply, institutional investors, technological enhancements, and inflation hedge. As long as the market remains unpredictable, Bitcoin’s main selling point is that investors still seek assets that are different from traditional investments. Bitcoin has got to remain a key figure in the financial realm for years to come, given that it has a fixed number of units, to wit 21 million, thus scarcity shall remain an ever-rising factor in its valuation.
