Did you know that the Bitcoin can hit $400,000 in 2021 undergoing a surge of 600%? According to a Bloomberg report, this is likely to happen; it seems possible given that Goldman Sachs, Morgan Stanly, and Visa have embraced digitalization of money. As the Covid-19 impacted financial markets worldwide, the crypto market was also not spared. But, strangely enough, while economies were struggling to stay afloat, Bitcoin prices rose from $7000 in January 2020 to $40,000 in January 2021. How did this happen?
How did Bitcoin prices surge during the pandemic?
- Because of Covid restrictions, the market has been volatile. People have lost jobs and chosen to invest in other stores of value like gold and precious metals, and cryptos like Bitcoin and Ethereum. The question them remains is why people chose to take refuge in cryptos like the Bitcoin during the pandemic. With people losing employment, new professions have emerged like crypto traders, influencers, technical analysts, and blockchain developers.
- The pandemic has led to the emergence of losers and winners across different sectors of an economy. At the national level, countries have introduced fiscal stimulus packages to keep the economy going until vaccines are out and the pandemic comes to an end. This widespread fiscal stimulus has led to interest rates coming down. In such a situation, Bitcoin turns out to be far less risky that it was perceived to in pre-pandemic times. Even though there is no centralized authority controlling the Bitcoin, it is being seen as a hedge against inflation. This is why it has been compared to gold.
- During the global pandemic, money printing has been on the rise, leading to inflation. Stock markets are shaky because it relies on businesses which in turn have been adversely impacted by the lockdowns. No surprises then why people have been moving their money into stable assets like the Bitcoin.
- Bitcoin prices have recently soared with more and more institutional investors showing an active interest in it. Tesla billionaire invested a whopping $1.5 billion into this crypto, sending the crypto world into frenzy. Since the Bitcoin is being seen as safe-haven asset and people are now keener than ever to hold less cash, the Bitcoin is poised to reach even greater heights. For instance, a business analytics firm, Micro Strategy, recently converted $425 million cash into BTC. The growing confidence in Bitcoins that companies are showing has given a fresh lease of life to the Bitcoin, making it a store-of-value.
- Another reason why Bitcoin prices may have surged in recent times is because it is now being widely accepted as a trusted means of payment much like PayPal. Recently, PayPal and Square have expressed their interest in allowing users to buy and sell Bitcoins and other cryptos. With almost 350 million users, PayPal’s decision can be one of the biggest reasons for Bitcoin’s sudden popularity.
Finally, with people forced to stay at homes in front of computers all day long, the chances of testing the crypto waters has increased substantially. Those who were not so much into cryptos have now started researching digital currencies and reading whitepapers. So, even though the pandemic may have thrown economies all over the world into disarray, it has sparked hopes for the Bitcoin.