At the time of writing, Bitcoin is nearing a new high of $ 20,000 per bitcoin. What has changed since the last time this high was reached?
The Covid19 situation has changed the way people do many things. Technology has been pushed to the forefront of everyday life. Things that used to be physically done in the virtual world – education, dining, entertainment, work, and the purchase of various goods and services – are now being paid for. The natural relevance of this type of agenda is the use of cryptocurrencies. why? It’s an extension of the tech-driven world. It can also be used to compete with the existing financial system at potentially low cost.
The last time Bitcoin hit a record high, many institutions were demonizing cryptocurrencies as payment methods used by criminals for terrorism, money laundering and the sale of illegal drugs. At this time, Mastercard and Visa are linking cryptocurrencies to their credit cards, and Paypal is now accepting Bitcoin on its platform. Many governments are talking about issuing cryptocurrency issues of their traditional currencies. There has also been a push by Facebook in partnering with major banks and other institutions to release a cryptocurrency called Libra that hasn’t gone far but the intention is there. Cryptocurrencies are not for criminals anymore unless the aforementioned institutions are committing crimes.
The key to any technology is widespread or mass adoption. The more people use a thing, the greater the demand for its use, and the more important it is to use it. With widespread adoption, the systems that work alongside the product begin to change. See Apple iPod, Microsoft Windows, Internet providers, and electric cars as examples. With the new demand will come new industries and products that were not very useful without the original product being approved.
Weak traditional investments
Due to the Covid and Depression scenario unfolding, investing in stocks and bonds has become very costly and entails higher risk as the underlying economy is separate from the performance of these markets. The high level of debt makes real estate investment riskier than it has been in the past, as well as the volatility of rental income and people’s ability to pay off their mortgage loan. Cash is a safe haven but rising debt and inflation expectations mean liquidity carries risks as well. The concept of diversification means that these investments should be held to some extent, but there is now a yearning for an asset to complement these products. This new asset is cryptocurrency. This product allows diversification from excessive debt, devaluation, and hyperinflation.