With a major market rally unfolding, Bitcoin has increased by close to 20% this week. The price of the most popular digital currency hit $56,000 – less than $2,000 shy of it’s previous high. The emergence of several factors are set to spur on the upward trend and Bitcoin may well reach a new high in the near future.
Bitcoin is not the only cryptocurrency to experience a renewed boost as Litecoin, Dogecoin, and Ethereum have all enjoyed similar market movements. The value of all three digital currencies have increased between 5% – 15% in the last week. Although these coins have managed to mirror Bitcoin’s success, the largest cyptocurrency by market cap has oustripped its competitors over the last 12 months. The value of Bitcoin has increased 10-fold and many speculate this is only the beginning.
The growth that Bitcoin has experienced throughout the last year has been astounding. Even more so when one considers that many traditional market participants and assets have stumbled and faltered. The pandemic has led many to look toward Bitcoin as being a digital asset much the same as gold. As economic uncertainty lingers in various spheres of society, this sentiment is sure to be shared by a wider audience.
The recent announcement that a third Covid relief bill will be signed by the president of the USA is also set to hike up the price of Bitcoin – albeit in the short term. This view is based on previous market reactions to relief packages that have been passed during the pandemic. The latest package totals $1.9 trillion and any individual who is eligible will receive a stimulus check worth $1,400. The previous stimulus check worth $1,200 resulted in a clear increase in crypto activity. Thus, the general feeling is the latest stimulus package will have a similar impact. Similarly, the flood of fiat currency into the US economy will increase inflation; marking a rise in the price of Bitcoin against the US dollar over the medium- to long-term.
Although the interest garnered by Bitcoin from institutional investors has been significant, retail traders are less interested in buying Bitcoin at the current price level. Many feel that the price of Bitcoin is too high to justify purchasing the cryptocurrency. This is evident in the decrease in new addresses being created on a daily basis. In conjunction, Bitcoin owners seem to be holding onto their assets for the time being. A large share of Bitcoin has been placed in cold storage and the supply liquidity of the digital asset is now estimated to be sitting at only 4 million.
At first glance, this may seem like a negative factor that will have an adverse effect on the price of Bitcoin. However, as a shortage of supply in Bitcoin might transpire, the price of the cryptocurrency will be sure to increase.