If you are a crypto enthusiast, you are either worried about the daily increase in the price of cryptocurrencies- due to fear of a market crash- or you are gleeful for the recent shot in prices.
While this may be a great development for investors, it must also be treated cautiously because a fully bloated belly experiences a crash.
Despite the no-longer novel pandemic and its ban in Nigeria, cryptocurrencies keep experiencing a boom that requires analysis, especially for a wary investor.
However, the recent increase in price may not raise eyebrows if the reasons for the raise are verifiable and appeal to logic.
For this reason, we have compiled some of the things that could cause the recent surge in price. Enjoy.
Institutional investment
The most logical reason anyone could give to the recent surge in price is the rate at which most institutions have began to include cryptocurrency in their payment wallet as well as investing their treasuries in crypto exchange.
Tesla $1.5billion investment is no longer a news as its announcement led to bitcoin reaching an all time high earlier on Monday.
Just recently, Square, an American payment company bought 50million worth of bitcoin while a public-listed company in the US- Microstrategy- converted its $425 worth of cash reserves into bitcoin due to the perceived store value.
As most companies keeps investing, there is an increase in demand which leads to a proportional increase in price.
PayPal announcement
in October 2020, Pay Pal, a global digital payment company, announced its plan to allow crypto exchange on its platform.
The coins that will be traded include: Bitcoin, Ethereum, Litecoin and Bitcoin Cash. The company also announced its intent to include crypto in it’s payment wallet.
With more than 350million users and about 30million merchants, this announcement and its execution must have contributed to the surge in the price of bitcoin.
This is addition to about 40million users that use Venmo, another Paypal platform.
The incidence of Bitcoin halving leading to scarcity
As at March 2020, one bitcoin was worth $5,000. The price reached an all time high yesterday above $48,000.
Since bitcoin is the father of all other cryptocurrencies, it the most mostly exchanged cryptocurrency with a market cap of 21million bitcoin.
Bitcoin is gotten through mining; this is a process in which computer networks solve very difficult maths problem to get about 6.25 BTC in return.
However, this reward reduces every four years or when roughly 210000 BTC has been mined. The process by which Bitcoin reward reduces by 50% every four years is called BTC halving.
The third bitcoin halving occurred this year. As bitcoin reward keeps dwindling, it is bound to become scarce.
Most people have realized this possibility, therefore the rate at which it is being acquired. Since bitcoin owns 50% of crypto market, an increase in it’s price will lead to automatic increase in the price of others.
If you are wary of investing in cryptocurrency, due to its high price, know that, this is a best time because the price will keep soaring higher. Know this and begin to invest.
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