The first three months of 2021 reported massive surges in the price of Bitcoin, which has successfully become the talk of the town, registering an all-time record high of over $60,000 in early March. While its value plunged, it seems to be gaining momentum again. However, every time the price of Bitcoin or any other cryptocurrency for matter surges, investors and critics are often quick to draw parallels to the infamous 2017 bull run.
The year 2017 was perhaps the first time Bitcoin was able to garner significant traction and hence, it was an exciting time for the cryptocurrency which was mostly a crypto-native and retail-driven market. Unfortunately, it ended with many investors suffering huge losses. But unlike bitcoin’s rally in 2017, which saw the price of the digital asset rise exponentially and then plummet, crypto experts claim that this time Bitcoin’s run higher will last.
This rise in 2017 helped bring the much-needed and deserved attention and headlines to the crypto space. Even though this proved to be quite beneficial for the digital asset, in the long run, most of what that market represented was a much less mature market than we see today.
Today, insurance firms, asset managers, hedge funds, and many corporate balance sheets are making huge bets on Bitcoin. These include Tesla, BlackRock, MicroStrategy, etc. Fintech behemoths such as Square, MasterCard, and PayPal have also jumped aboard the crypto bandwagon.
Data from Glassnode shows that’s about 95% of Bitcoin’s market capitalization is kept in wallets that hold at least one Bitcoin. This indicates that the vast majority of Bitcoin holders today are mostly wealthier investors rather than the smaller scale retail investors.
This kind of mainstream adoption by large companies and funds is highly important because cryptocurrencies like Bitcoin aren’t backed by an asset nor do they have the full faith and backing of a central government. Instead, they’re valuable because people believe they’re valuable which is what essentially drives the price upwards. Hence, some of the major Wall Street players buying in has significantly helped restore the lost faith and inspire the confidence of many investors in the cryptocurrency. Such a level of institutional backing only seemed like a dream in 2017.
However, the sudden institutional interest in Bitcoin and its untapped potential isn’t the only difference this time around. The Covid-19 pandemic wreaked havoc on the world’s economy, forcing asset prices and currency values to dip. With economic turmoil and the high devaluation rates of almost everything in the world, Bitcoin was perhaps the only asset following an upward trend instead of plunging like its fellow assets.
In 2017 there were no such circumstances that threatened the world’s economy to this extent. Hence, the stronger and bigger surge in value this year has also been supported by the fact that investors have come to recognize that Bitcoin is actually even more scarce than gold or any other precious metals for that matter.
A cap of just 21 million bitcoins has been built into the source code which means there can only be a limited amount of bitcoins that can ever be mined. Currently, 18.6 million of these are already in circulation. This leaves behind a small number of Bitcoins to be mined. This scarcity helps the digital asset retain its value regardless of the economic conditions, making Bitcoin an effective hedge against inflation.
The approval of President Joe Biden’s stimulus package of $1.9 trillion has also further sparked fears of the economy overheating resulting in devaluation of the dollar and higher inflation. Hence, more and more investors are now turning towards Bitcoin as an inflation hedge.
Also, bitcoin backers have pointed out that the virtual currency will likely remain popular with investors who view it as a store of value during times of inflation, much like gold. This has further fueled the Bitcoin frenzy. There have even been talks about Bitcoin potentially replacing gold, with many supporters calling the cryptocurrency “digital gold“.
Furthermore, this time around, there are a lot more exchanges, trading platforms, and tools to facilitate bitcoin investors and traders. Trading platforms, such as Bitcoin Mastery, especially have completely changed the game for novice crypto traders. They have emerged as a safe haven for beginners and help to somewhat level the playing field by offering options such as auto-trading. They make use of advanced technologies and algorithms to capitalize on short-term crypto booms, ensuring lucrative trading experiences for their uses. You can check out bitcoin mastery to learn how one such platform works.
In short, 2021 so far has seen greater institutional interest, better opportunities for trading and has taken some major steps toward mainstream acceptance. The future for this cryptocurrency is still uncertain but one thing is for sure: it has come a long way since 2017 and is only getting started.
