Key highlights:
- BTC is recording new ATHs, and it is soaring rapidly
- Institutional investors are flocking to Bitcoin, and this can bring massive capital to the BTC market
- The recent Bitcoin price spike could be connected to FOMO and bullish sentiments among investors, not fundamental reasons
More than ten years after Bitcoin’s launch, it’s clear that Bitcoin is here to stay and isn’t just another fad. Bitcoin has been on an enormous bull-run in the second half of 2020, and recently recorded new all-time highs. A few days ago, the king of cryptocurrencies touched an unprecedented peak of 28k.
BTC passed the peak of 2017, and appears to be headed to $30,000 next. Due to the pandemic, many investors poured their money to BTC because Federal Reserve decreased the interest rate to near zero and accelerated their money printing. These measures reduce the dollar’s value, and many investors are changing their greenbacks to other assets like Bitcoin, gold and stocks. The first cryptocurrency of the world has a fixed supply, and is created according to a strict schedule enforced by code. Gradually, people are realizing BTC’s potential, which creates more demand for the cryptocurrency.
Reputable investors are flocking to BTC
Another reason for Bitcoin’s growth is the presence of big-name investors. This provides more legitimacy to BTC, leading other institutions and investors to become interested as well. Today, we see reputable companies like BlackRock in the space, and giants like PayPal and Square accept have also warmed up to Bitcoin. When a reputable investor comes enters a chain effect, as other investors seek to imitate their moves.
After Bitcoin reached new all-time highs, one of the largest cryptocurrency exchanges, Coinbase, announced that it plans to go public. This is yet another factor that’s legitimizing cryptocurrency even further.
Fear of missing out is another reason for the recent bull run
As with any bull run, the Bitcoin price spike is also influenced by fear of missing out or FOMO and positive sentiment among investors. There are many enthusiasts in the crypto space, and they continuously promote this new technology.
Cryptocurrencies can spike in price for seemingly absurd reasons – the recent statements about Dogecoin by famous entrepreneur Elon Musk are an evident example of this. Dogecoin, which was created as a parody of »serious« cryptocurrencies like Bitcoin, jumped in price by around 20% after Elon Musk mentioned it on his Twitter account.
Although many people are adopting Bitcoin and we can find it in many portfolios, investors should still be cautious about this asset. BTC is notoriously volatile, and its price can drop suddenly with seemingly no obvious reason. BTC can have price corrections that are sharp and violent, leading to panic in the market.
On the other side, Bitcoin has proved itself during the last decade. It is the best investment of the previous decade and outperformed S&P 500 and the vast majority of stocks. People who have invested in Bitcoin in the beginning days now have enormous wealth.
BTC has its own risks, the most obvious being its price volatility. Every investor has to be prepared for sharp corrections and unexpected events that can throw a wrench even in the most careful investment strategies. Cryptocurrency investment has its risks, just like investing in other assets.
