Recently the price of Bitcoin exceeded $60,000, which again proves the fact that this bull market phase isn’t like the previous ones. This has resulted in a newfound interest in institutional investors, governments, and individual investors in cryptocurrencies. But a lot of new investors are curious about the factors that impacted this new bull market phase. In this article, we explore some of the most important factors, which essentially drive the price of Bitcoin.
The Ratio of Supply and Demand
Satoshi Nakamoto was motivated to create Bitcoin because he/she found that fiat currencies relied too much on the trustworthiness of financial institutions. And, as we know, the financial crisis that rocked the world in 2008 was mainly caused by deregulation in the financial sector.
With that being said, Nakamoto has created a decentralized blockchain network that is operating without the interference of any financial institution or external party. In fact, Bitcoin is a decentralized cryptocurrency which means its supply and demand aren’t regulated by the monetary or fiscal policies of any central authority.
Actually, the interaction of supply and demand on the market drives the value of Bitcoin. However, Satoshi Nakamoto wanted to control the inflation rate, which is why he/she took important steps towards this goal. First, it’s written into the Bitcoin’s code how many BTC will ever come into existence. The total number is 21 million. Furthermore, Nakamoto has also programmed Bitcoin halving to take place every four years, or after 210,000 blocks are mined. Then, the given block reward to the miners is cut in half.
This event affects the momentary supply of BTC, as mining produces new Bitcoin into circulation. In addition, the rate of this inflation is simultaneously cut in half with each halving. To sup um, this means that the supply is not growing as fast as the demand, it is actually very scarce, and this fuels the demand for BTC, as well as its bull cycle.
Mainstream Adoption
Another factor that drives the demand for Bitcoin it’s its accessibility to the public on online exchange sites. For example, you can register on Bitcoin Prime, create an account and start trading. The auto-trading system is based on advanced AI-driven trading algorithms in order to ensure consistent performance on the site.
In other words, anyone that wants to invest in BTC can, as there is an abundance of exchange platforms. So, there are a lot of retail investors that are buying Bitcoin, but the main impact on the demand have institutional investors and companies that accept BTC payments.
Otherwise, we see financial institutions like JPMorgan, the Mellon Financial Corporation supporting Bitcoin. When it comes to online and offline businesses that accept BTC, you will notice that there are a lot of famous brands like OkCupid, Shopify, Sleep, Bed and Bath, and many others. In addition, Bitcoin is also considered a good store of value.
Good Store of Value
Bitcoin is considered a safe haven asset or a good store value because, as we mentioned before, Bitcoin is very rare and is by design a deflationary cryptocurrency.
So, this is why institutional and retail investors want to invest in BTC. Its value is not controlled by the fluctuations of the financial markets, fiscal, monetary policies, or any external events like political crisis, for example. Because they treat it as a safe-haven asset, the demand is increasing, which results in a massive bull market phase.
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