Despite major world economies being disrupted by COVID-19, the cryptocurrency industry is rebounding strongly. When businesses were feeling the effects of the epidemic and their businesses were suffering, several crypto and blockchain startups sprung up to meet the soaring demand for Bitcoin and other cryptocurrencies. While many crypto exchanges and trading platforms have emerged from around the world, some have also managed to raise significant funding from investors in order to expand their market position, such as CoinSwitch Kuber, which recently raised INR 109 crore (US$15 million – Series A funding) from major fintech players such as Ribbit Capital, CRED, and Paradigm.
Bitcoin, the world's most valuable crypto coin, boosted the cryptocurrency market by pushing its market capitalization beyond $1 trillion. For the previous few weeks, Bitcoin has been on the rise, accounting for 69 percent of the overall market capitalization. Bitcoin investors are ecstatic about this rebound, as the price of bitcoin fell during the crypto market meltdown and is only now beginning to recover. This is the same Bitcoin that, in early 2021, hit an all-time high of US$60,000.
But how did this successful correction take place in the market? Here are five reasons behind the current growth of the cryptocurrency market :
1. Green signal from institutions
Bitcoin, which was formerly seen as speculative, is now acknowledged by major institutions all around the world. Despite its volatility, the crypto coin is regarded as a secure asset, paving the path for other cryptocurrencies to follow suit. Many public corporations, including as Square, an American payments firm, and Microstrategy, a publicly traded US corporation, have recently purchased Bitcoins to convert their cash treasuries into cryptocurrencies.
2. Paypal crypto exchange
Paypal has a user base of almost 350 million people. Paypal will introduce a new feature in 2020 that will enable its millions of customers to buy and trade bitcoin on the website. This function allowed users to trade cryptocurrency such as Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. Paypal was one of the harshest detractors of cryptocurrencies, thus this is a huge move for the crypto business. Venmo, following in the footsteps of Paypal, has created a similar service that allows users to make bitcoin payments.
3. The scarcity factor
Even Bitcoin and other cryptocurrencies are only available in limited quantities. However, Bitcoin's strategy of halving its supply boosts its value significantly. A scarce commodity is valued higher than others due to its scarcity, which is a basic economics principle. The Bitcoin network functions because fresh currencies are created through mining. Bitcoin miners use this procedure to verify Bitcoin blocks. A miner checks one block of transactions every 10 minutes and adds it to the Bitcoin network to win rewards. The reward is currently 6.25 BTC per block, and it decreases by half every four years or when 210000 blocks have been mined. Bitcoin halving is the process of halving Bitcoin payouts in half.
Because there are only 21 million Bitcoins in circulation, when the reward lowers, there is less circulation in the market, which boosts demand for the coin due to scarcity. As a result, the value of other cryptocurrencies is affected.
4. Easy Accessibility
Initially, bitcoin was intended to be used as a payment method. It has, nonetheless, evolved into a store of value. Users are eager to invest in cryptocurrencies as an asset, even if they are unwilling to utilise it to make payments. Investors are hoarding Bitcoin for their value in nations like India, where the RBI is against it. Many services have also emerged to make bitcoin an easily accessible asset.
5. Acceptance from countries
As more individual investors and institutions accept cryptocurrencies as a form of payment, more governments are stepping in to create cryptocurrency legislation. Countries such as Japan, the United States, Germany, and El Salvador have embraced cryptocurrencies. El Salvador was the first country to use Bitcoin as legal money.
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