Bitcoin is on a bull run. With prices touching $16,000 for the first time, it has far surpassed every expectation set by analysts for the year end price. But what are the reasons of this boom? Why is the price rising so rapidly?
Here are 7 reasons why we think Bitcoin price has been skyrocketing
- Handsome Returns
Bitcoin as an asset, offers handsome returns. As the profit strategy says, buy for less and sell for more. And the profit percentage is what a lot of investors look for. Even the common people, the buy bitcoin and other cryptocurrencies for some amount today, hold it for some time and then sell it when the price has soared. Bitcoin offers a nice choice in this regard, partially because it is the oldest and the more trustworthy currency. The currency has the record of recovering every single time it plunged. The fact that there are awesome returns makes it even more lucrative than stock markets.
- The Announcements of Bitcoin Futures
A futures contract is a contract between two parties where the buyer and the seller agree to buy and sell a specific quantity of a commodity at a specified price on a specified date. The advantage being, it hedges risk. Thanks to the announcements of futures contract for Bitcoin by the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE), the risk regarding the price volatility which was preventing so many investors to invest in Bitcoin has been reduced. This has further raised the price.
- Growing Interest in Cryptocurrencies
It is no secret that the interest in cryptocurrencies has grown a lot. Looking at the stats, six times more money has been raised this year through Initial Coin Offerings (ICOs) than last year i.e 2016. This is a proof of the fact that more and more people are getting interested in cryptocurrencies. Also the number of ICOs increased as well. The fact that attackers responsible for attacks such as the ransomware one ask for payments in Bitcoin also motivates the general public to go look up this new word.
- The Implementation of Segwit
For those unaware of Segwit, it is basically a soft fork which will increase the transaction capacity. The original block will be split into two parts, where one part will be reserved for the witness data, i.e the scripts and signatures. It freed up the clogged transaction chain and made transaction processing faster. This made Bitcoin a nice option for general public. For who doesn’t prefer the ease of use?
- The Extensive Media Coverage
Media is known to have considerable effect on how the things turn out. The recent surge in price caught media’s attention and crypto world was not limited to the tech-savvy people anymore. As more and more people started becoming aware of the currency, more and more people started buying it. This also caused the price rise.
Because of the above mentioned reason as more and people started buying it, the ones who did not buy had to buy. To put it more clearly, people who bought bitcoins started talking about it with their friends and family. The price rises, the possibility of profits, the equivalence to digital gold and so on. As human psychology works, it makes the non-buyers feel that they are missing out on an awesome opportunity to make money. So they join the buyers community as well contributing to price rise.
- Demand and Supply Principle
At last we should not forget the demand and supply principle from Economics. Bitcoin’s supply is limited to 21 million bitcoins, not more and not less. As the demand for bitcoin increases but the supply remains the same, prices are bound to increase.
Imagine that there are only two apples and nobody wants to buy them initially but then suddenly someone announces that you’ll be given a prize for buying those apples and now everybody wants those two apples. Obviously the shopkeeper will want to give the apples to the highest bidder and thus price of the apple increases.
Similar thing is happening with Bitcoin. Because of the reasons above everybody wants to buy Bitcoin but there are only 21 million Bitcoins. So the price has risen.
There are speculations in the crypto-world that the recent price rise will cause a crash. There are also people who say that Bitcoin will rise and rise from this point onwards. Nobody knows for sure. But even if the crash happens, Bitcoin will likely recover soon as has been the case always.