Bitcoin has done it again to set new price records as it crossed the $70,000 per unit price tag for the first time ever. This comes at a time when institutional adoption of the world’s largest cryptocurrency by market capitalization is happening at an unprecedented rate. The most recent rally has been driven by a multitude of factors such as demand for bitcoins from corporate treasuries, acceptance by conventional financial institutions and a favorable regulatory environment.
Some of the large multinational corporations in the US have recently revealed that they have purchased large quantities of Bitcoins for use in managing their corporate treasuries. This trend that started with MicroStrategy and Tesla in the year 2020 has now found its way in other industries. It is considered as an inflation hedge and as a means of improving the structure of corporate balance sheets in the conditions of economic risk.
Big players in Wall Street have also contributed to the surge of Bitcoin. Traditional financial institutions and companies have also started adopting cryptocurrencies as investment banks have opened crypto trading desks and custody services and asset management companies have come up with different products that are linked with Bitcoin. Amongst the significant advancements for the acceptance of crypto currencies, the approval and success of Bitcoin ETFs in the United States of America has played an important role in attracting institutional capital.
Legal certainty has enhanced much across the world regarding the investment in the different regions, thus offering a more stable legal framework to the institutional investors. Places such as El Salvador that recently made Bitcoin legal tender have prompted other nations to consider the same. Currently, many central banks are already researching or experimenting with their own central bank digital currencies, partly due to Bitcoin’s achievements.
This is seen by the fact that the price of Bitcoin has been on the rise and so has the prices of other cryptocurrencies. Many of the altcoins have also risen in value with Ethereum the second largest cryptocurrency by market capitalization also posting good gains. The overall market capitalization of all cryptocurrencies has now reached over $3 trillion, a number that couldn’t have been thought possible in recent years.
However, the rather fast price increase has also been a source of concern especially in relation to the stability of the market and possibility of a bubble. Some people say that the current valuations are too high and there are even predictions of a crash. The authorities of several countries have recently made statements concerning the potential dangers of investing in cryptocurrencies.
Nevertheless, the enthusiasts of Bitcoin do not share such fears and continue to look at the bright future of this currency. Some argue that such factors as a fixed supply, decentralization, and increasing acceptance as a store of value mean there is still much to be positive about. Some experts believe that Bitcoin can hit a $100,000 or even more in the future year.
As Bitcoin keeps on rising, its effects in the world economy becomes hard to overlook. Governments and central banks of the world are struggling to come to term with the fact that there is a new currency that is almost borderless and operates beyond the conventional monetary systems. It is evident that the future of this digital currency is bright and therefore the debate on whether bitcoin will be part of the future of money will continue for a long time to come.
