On March 5, one Bitcoin is traded equivalent to $68,900. It is the highest price of the currency in its 15-year history. It is an amazing comeback of Bitcoin when its price hits rock bottom trading at only $17,000 per coin in November 2022. The significance of understanding Bitcoin price increase and its consequences are:
Bitcoin is no longer a hypothetical currency. This digital currency is now accepted as an alternative currency option for purchasing goods and services in many places, and a different investment choice that has enormous potential to increase your wealth.
Causes of Bitcoin’s Price Surge
The dramatic price hike of Bitcoin baffles people in general. What so happened dramatically behind this price surge? was it a manipulation by crypto miners to dupe other people? Financial experts suggest two possible answers to the revival of Bitcoin. The first reason is the influence of ETF or equity-traded funds. The ETF is like a package of different types of investments including stocks, bonds, and commodities. The ETF is traded on a regular stock exchange. When you buy an ETF, it means you acquire an investment package comprising different types of investments.
The SEC or Securities and Exchange Commission approved that Bitcoin will be included in an ETF for future trading. In other words, Bitcoin can be traded in a regular stock market from now on. It also means one does not separately own a Bitcoin for trading, and investors, whether small or big can directly participate in Bitcoin trading while avoiding the hassle of keeping the cryptocurrency in a wallet. This easing in Bitcoin investment pushes the price of the digital coin to skyrocket.
The second probable reason is Bitcoin halving. The Bitcoin halving is a recurring event that is programmed into the Bitcoin program when miners are rewarded with half of the emitted coins. The objective of the event is to create a sense of scarcity for Bitcoins and increase their price.
Consequences of Bitcoin price surge
The impact of the Bitcoin price surge means the owners of the digital assets are making money out of thin air. Countries, where people have more Bitcoins, will experience the wealth effects. The wealth effect refers to people’s tendency to spend more as they feel their assets are secure. Speaking more straightforwardly, the wealth effect will inject inflation into an economy. The wealth effect will also push housing prices up. In the USA the Federal Reserve Bank and the central banking authorities of other countries will exploit the wealth effect to offset the economic loss of the Covid-19 financial loss by purchasing more bonds.
price surge of Bitcoins will have a positive ripple effect on the whole cryptocurrency ecosystem. Investors will feel more confident investing in other cryptocurrencies like altcoins. We will also see more adoption of cryptocurrencies by different business entities. Finally, the surest consequence would be more volatile Crypto market.
