Looking for the reasons for Bitcoin’s recent rapid rises and falls

The price of Bitcoin on Thursday, January 7, exceeded the mark of 40 thousand US dollars and reached the mark of $40380, according to the portal CoinMarketCap, raising by almost 10,000.[1]

I was wondering what are the reasons for such abnormal even by bitcoin standards vitality. Here is what I found.

A bit of history at first. After its appearance in February 2009, bitcoin experienced a sharp rise, because initially this digital currency cost only a few cents. In the first years of its existence, this virtual money did not attract much public attention. In 2013 alone, the bitcoin exchange rate surpassed the $ 1,000 mark for the first time.

At the beginning of 2020, the value of this cryptocurrency was about eight thousand dollars. In March, during the first wave of the COVID-19 pandemic, it cost less than four thousand dollars but immediately began to grow slowly again.

The rapid growth of the bitcoin exchange rate came in the fall after the payment system Paypal announced in October that from 2021 it will allow its customers to pay with digital money, including bitcoins. Bitcoin currently accounts for more than 70 percent of the cryptocurrency market. [2]

The Office of the Comptroller of the Currency in a guidance letter this week said national banks and federal savings associations may use new technologies, including independent node verification networks — also known as blockchain networks — and related stablecoins, to perform bank-permissible functions. [3]

Stablecoin is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the price. [4]

And although bitcoin is not a stablecoin, you always could exchange your bitcoins for stablecoins and perform bank operations in them. This is a huge step in the adoption of bitcoin, as it allows to overpass the regulatory limitations on operations with speculative cryptocurrencies.

Another major step in the crypto revolution is China announcing its first digital currency. Observers say China wants to internationalize the yuan so that it can compete with the dollar.

Also, experts say the Chinese government believes this move will increase the number of countries using the Chinese currency and help China compete with the United States currency domination. [5]

Some businesses already adjusting to the prosperity of bitcoin. For example, ATMs with the function of selling Bitcoin cryptocurrency have been installed at two American Tesla plants. [6]

Although, the future of Bitcoin itself is yet unsure, what we know for sure is that cryptocurrencies’ role in geopolitics and our daily life will continue to increase.

#bitcoin #china #us #currency #cryptocurrency #CoinMarketCap #digitalcurrency

Data Science Consultant

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