Bitcoin, the most popular cryptocurrency around the globe, has returned into the limelight again as it crossed the $47,000 mark on Tuesday. This latest price movement has been witnessed in light of increasing institutional adoption and favourable market outlook.
It has been equally impressive to note that the digital asset has been steady to the different global economic challenges hence proving to be a store of value and possibly an inflation hedge.
Recent price rise can be explained by several factors such as; enhanced usage by large organizations and financial institutions. The past year has witnessed some organizations such as Tesla, MicroStrategy, and Square incorporate Bitcoin in their balance sheets as they change their corporate treasury management. Also, many conventional banks and investment companies have embraced the provision of BTC services to their customers, which makes the crypto-world more mainstream.
Another factor that has influenced the Bitcoin’s upward price movement is the increasing demand for Bitcoin ETFs. Earlier this year, the U. S. Securities and Exchange Commission (SEC) approved several spot Bitcoin ETFs, which means that institutional and retail investors have a new possibility to invest in the cryptocurrency market.
The following table shows that these ETFs have received a lot of fund inflows soon after their inception suggesting the demand for Bitcoin investment products.
The debate of whether Bitcoin is an inflation hedge asset or not has also contributed to its price increase in recent past. As central banks in different countries maintain their expansionary monetary policies, several investors are now seeking to preserve their wealth by investing in Bitcoins. The availability of the digital currency is limited to 21 million coins as opposed to the current flood of new money from governments and global central authorities.
Nevertheless, it should be pointed out that the level of volatility of Bitcoin’s price remains rather high. Despite the general upward trajectory, the cryptocurrency market is vulnerable to short-term volatility in response to diverse factors, such as regulatory updates, macroeconomic occurrences, and changes in investors’ sentiment. As usual, the potential investors are encouraged to exercise high level of caution whenever they are approaching the market and they should avoid any rush in investing without proper research.
In the future, there are many analysts who continue to see Bitcoin’s potential and its future in this industry. Others expect the digital asset to hit fresh record highs in the next few months as more institutions continue to embrace the asset class and more retail investors join the market. But others believe that regulatory issues and possible market fluctuations may become threats to the Bitcoin movement.
It is very probable that the Libra’s function as a speculative instrument and as a store of value will change as the cryptocurrency develops furthermore and becomes a part of the global financial system. The next couple of months will be decisive for further Bitcoin development and its ability to maintain the current pace of growth and become a part of the mainstream financial market.
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