Bitcoin is gaining mainstream acceptance among money managers and fintech firms creating a demand surge as more customers are able to gain access to Bitcoin as an alternative investment asset or to be used as a hedge against fiat currency inflation.
Going into the new year in 2021, Bitcoin has reached a high of USD$29,688 in early morning trading. Key market participants driving the price higher are mainly from Fintech and legacy players entering the market in order to hedge against a devaluation of the US dollar and as a hedge against inflation in major currencies around the globe.
Bitcoin, the grandfather of the cryptocurrency world, is the world’s first cryptocurrency, a peer-to-peer, network driven, currency with a limited supply. What makes cryptocurrency an ideal store of value is the way Bitcoins are produced and transferred. In the realm of cryptocurrencies, the code dictates the rules of the market and changing the code requires consensus of all participants within the blockchain system. Blockchain systems are only effective in decentralized systems as every participant will have to abide by the same rules, and changing any of the rules will require 51% of the participants to agree to the change.
The code has set that the total amount of Bitcoins that can be in circulation is 21,000,000. New Bitcoins are introduced to the system through an energy intensive process of digital mining set at different rates depending upon the amount of miners on the network. As demand for Bitcoin increases, the introduction of new Bitcoins are limited, hence creating deflationary pressures to its pricing against major currencies.
Bitcoin has major appeal among investors who are interested in alternative investment products giving it major liquidity through cryptocurrency exchanges all around the world. Its proponents herald it as the next big thing in the financial world while its detractors have called it a new form of “scam” or “tulip bulb mania”.
One thing is for certain, Bitcoin are financially transparent. All Bitcoin transactions can be verified by any party and all holding of bitcoins in a certain wallet can be audited by anyone using sites like https://btc.com/ to determine which pool has mined the latest bitcoin, or determine the amount of a Bitcoin a wallet holds using Bitinfocharts.com , providing it a level of financial transparency that is unparalleled by any other financial product currently in the market.
Square, a major fintech player, purchased around USD$50 million worth of Bitcoin in early October. Square has seen its holdings value ballooned to over USD$110 million based on today’s prices. It has also seen demand for Bitcoin from its pool of younger users on its popular “Cash App” product. Paypal not wanting to be outdone by its rival, has also gotten into the space with its own Bitcoin offering through its competitor app, Venmo, allowing Bitcoin to be accessible to a huge segment of the market typically unable to participate in main stream financial products.
On December 21st, Nasdaq listed public firm MicroStrategy (Ticker: MSTR), through a press release to announce that it has purchased approximately 29646 Bitcoins at an average price of $21,925 per Bitcoin adding to its current holdings bringing its Bitcoin reserves to an approximate total of 70,470. This further solidifies the existing bull case for Bitcoin market price.