The crypto industry appears to have regained its momentum in recent weeks as most of the coins/tokens continue to march higher – posting mostly green days right across the board. While Bitcoin is still far from its all-time high of $64,800 set in April, investors still have plenty of reasons to be optimistic about the final quarter of 2021.
At the time of writing, the entire crypto industry is valued at just shy of $2 trillionafter enjoying a healthy recovery from the severe drop we saw between May and July. But what is the main driving force behind the latest cryptocurrency rally, and what can we expect from Bitcoin and the altcoins in the coming weeks and months? Let’s take a closer look at some of the factors that could be at play.
The $2 trillion mark
For many investors, the $2 trillion mark is a significant milestone for the overall validity and authenticity of the crypto industry as a whole. In the past week, we finally tipped over the $2 trillion point for the second time in history, which is a considerable achievement considering the humble roots of Bitcoin and the other digital currencies that make up the top charts.
With this in mind, both retail and institutional investors seem to share the same bullish sentiment looking towards the future, especially after Bitcoin managed to hold steady and regain its composure after the threat of another bear market loomed large.
It’s safe to say that confidence is building in crypto once more, and as global stocks continue to slide, the appeal of digital currency increases even more. If you’re thinking about getting into the market and increasing your exposure to digital assets such as Bitcoin, Ethereum, and Dogecoin, then click hereto find out the best way to go about it.
Safe haven asset away from inflation
Another reason for Bitcoin’s rise is the growing inflation of the US dollar. As you know, the coronavirus hit most countries very hard, but the USA was one of the worst affected, particularly during the early stages of the outbreak. To compensate for the mass lockdowns, the US government had to turn to quantitative easing measures in order to keep the economy moving. Unfortunately, somebody will have to foot the bill eventually as all of the printed money must be accounted for one way or another.
This has many people concerned about the inevitable diminishing of the dollar’s purchasing power and a rise in inflation, which means that holding USD will likely be a losing game in the coming years. Rather than watching their money dwindle, individuals are looking for safe havens where they may invest their money to protect themselves and their net worth. As it turns out, many people have moved their money out of the dollar and into Bitcoin and other cryptocurrencies, resulting in a tremendous spike in demand and a price increase.
Adoption as a means of payment
Amid all of the speculation, it’s easy to forget that Bitcoin and most other cryptocurrencies possess real-world applications that provide many benefits over some of the more traditional ways of doing business. One of the primary use cases for cryptocurrency is as a payment method since they offer peer-to-peer transactions digitally without the need for any physical cash (from anywhere across the globe).
Now, many of the major retailers in the world accept Bitcoin and other cryptocurrencies as a means of payment, such as:
- Home Depot
As time goes on and more people turn to Bitcoin as a means of payment, its global audience increases, and demand rises.
The rising cost of production
For Bitcoin, the mining difficulty rises in conjunction with the size of the mining network, increasing the marginal cost of producing a Bitcoin. For those of you that aren’t aware, Bitcoin mining consumes a lot of electricity, which has an actual cost that miners must pay in their local currency.
Because Bitcoin’s protocol requires that one block be discovered every ten minutes on average, greater hashing power directed towards mining does not improve the rate of new supply; instead, it increases the difficulty of mining. According to research, the price of a bitcoin has mirrored its marginal cost of production quite closely. As a result, the price grows in tandem with the cost of production. That is, at least, how the theory goes anyway.
Last but not least, there has been a lot of hype recently over the possibility that Amazon may finally begin accepting cryptocurrencyas payment for products and services on their website. While this may not seem like big news at first (especially after you consider the fact that many other huge retailers already accept BTC as a means of payment), it’s worth stopping just to take stock of just how giant Amazon has become over recent years.
After the Covid-19 pandemic saw a massive uptick in demand for Amazon, its profit increased by a whopping 84% over the past 12 months, making it the 5th largest company in the world. Net revenue from sales was reported to be a whopping $386 billion, according to Statista.
If the global mega-retailer does decide to accept BTC and another cryptocurrency for payments, then there will be an incredible increase in demand for digital currencies. This huge surge in demand will almost certainly cause a significant spike in price, and it could be a catalyst for many other businesses following suit and accepting crypto as a payment method. This would truly open the floodgates for Bitcoin and would likely signify a key milestone for the widespread adoption of digital currencies.