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Bitcoin cryptocurrency prices rose astonishingly from about 6 cents – almost 11 years ago – to more than 34 thousand US dollars early this year, to record their highest levels ever.
Bitcoin cryptocurrency prices have increased by more than 300% over the past year, 50% last month, and 10% in the first days of this year only.
Whereas the number of Bitcoin cryptocurrency units in circulation currently stands at approximately 18 million 590 thousand and 169 units and taking into account the value of Bitcoin at its maximum increase these days, the market value of Bitcoin exceeds $ 630 billion, thus exceeding the value of long-standing financial companies such as Visa And MasterCard and PayPal, but Bitcoin occupies the ninth place in the world in terms of market value.
Here are the reasons for this resounding rise in Bitcoin recently:
Fear of a decrease in the purchasing power of the dollar
Late last year, the United States adopted an economic stimulus package estimated at $ 900 billion, after it approved $ 2.2 trillion with the outbreak of the Corona pandemic in March 2020, bringing the total stimulus packages to $ 3.1 trillion, to recover from the effects of Corona on the economy.
This huge amount raised investor concerns about high inflation, a declining dollar and a decrease in its purchasing power, which prompted them to rush to buy Bitcoin to store money, preserve value and hedge against any future decline in the dollar.
And unlike paper currencies such as dollars that can be printed whenever governments and central banks want, regardless of the growth of goods and services available in the market or not, which may result in a significant increase in inflation and a sharp increase in prices, it is impossible to print any additional quantities of Bitcoin that automatically resist inflation. And it is characterized by scarcity as the metal of gold, as the total money supply of Bitcoin cannot exceed 21 million units in circulation, a number that can only be achieved in 2140.
The laws of mathematics and software guarantee a steady and planned supply of new Bitcoin releases, as, within the framework of what is known as the mining bonus, 6.25 new configurations are issued once every 10 minutes on average, which allows controlling the money supply of this currency, and thus controlling inflation.
To ensure that the highest ceiling of the number of Bitcoin in circulation is not reached until after 119 years, the mining reward is reduced in half approximately once every 4 years, as its value at the start of trading Bitcoin was 50 in a formation, and the current reward became 6.25 in configurations as of 2020.
The growth of institutional investment
The increasing use of Bitcoin as an asset and as a store to save value and money has recently increased, prompting many people and institutions to invest in this currency.
Many analysts attribute the reasons for this tremendous rise in the value and price of Bitcoin to the huge institutional investment in this digital currency, after investing in it in the past was limited to amateurs and small investors, especially in light of the regulations, laws and legislation that were limiting the involvement of major financial institutions in Bitcoin.
The Financial Times reported that Britain-based investment management company Ruffer had invested about $ 745 million in Bitcoin since November 2020, which represented about 2.7% of the company’s managed assets at the time.
Motivating use as a means of payment
PayPal’s announcement to allow its customers to use cryptocurrencies in the buying and selling process constituted a huge moral leap for Bitcoin, which doubled the demand for it, leading to an increase in its prices.
Starting this year, the company’s users will be able to use Bitcoin to make purchases from its network of more than 26 million merchants.
To avoid extreme price fluctuations in Bitcoin, when the customer wants to use the Bitcoin cryptocurrency for payment, the company will immediately convert Bitcoin into a fiat currency and the transaction will be settled with the merchant using this traditional currency, such as the dollar, for example.
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Organizational development
Some analysts believe that to provide a sustainable environment for Bitcoin cryptocurrency, develop its activities, and provide a legal protection umbrella for its dealers, it is imperative to enact regulatory legislation that frames the use of Bitcoin and regulates the conduct of activities related to it.
In this context, the New York State financial authorities announced the launch of a license known as “Bitlicence“, which aims to legalize and regulate the practice of cryptocurrencies in general, especially Bitcoin.
From this standpoint, institutions and companies wishing to establish bitcoin exchanges in New York state, for example, must obtain this license first.
And recently, some countries have rushed to legalize Bitcoin, and some central banks recently announced the launch of their cryptocurrencies using Blockchain technology.
These legalization and regulation measures contributed to raising the level of confidence of dealers and investors in Bitcoin, which opened the door wide to the huge influx of capital by various investment institutions as well as hedge and retirement funds to invest in Bitcoin.
The rise of Bitcoin taxes
After decoupling the dollar from gold, the only guarantor of the dollar’s value became the US government and the US Federal Reserve, and one of the main arguments of the proponents of paper currencies was that governments accept – and even impose – that taxes be paid using legal paper currencies – not backed by a precious metal like gold – such as the dollar For example, which contributed to creating a demand for these paper currencies, and contributed to the stability of their value over the years.
On the other hand, hackers have also been able in recent years to impose ransom payments on their victims using the Bitcoin currency, which led to the rise of what became known as Bitcoin taxes, which became a competition and even parallel government taxes, which also contributed to creating additional demand for Bitcoin and contributed to At their high prices.
The pitfalls of competing cryptocurrencies
While Bitcoin is the largest cryptocurrency in the world, XRP is the third-largest cryptocurrency in the world.
And Bloomberg reported that late last year, the US Securities and Exchange Commission charged Ripple Labs In – the owner of the currency of XRB – and its senior executives of misleading investors in XRB from During the sale of more than one billion dollars of this currency without registering with the committee, and the company was referred to the court.
This legal action undermined the confidence of dealers in the XRB currency, which led to an immediate decrease in its value by nearly 16%.
On the other hand, this measure also led to the migration of investors from this currency towards Bitcoin, which resulted in an increase in demand for Bitcoin and thus an increase in its prices.
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