Why did the Bitcoin price go up from $12,000 to $18,000 in the past month?
Bitcoin has once again proven to be the best performing asset for the year with a 147% return YTD.
A year back Bitcoin was at around $4,000. So, what has led to this gigantic upside to the price of Bitcoin, let us look at some of the reasons –
Bitcoin block reward halving event on 11 May 2020
Bitcoin block rewards are the way to introduce new bitcoins in the system. This process is called mining and the people creating blocks are called miners.
Bitcoin protocol ensures that the reward goes half after every 210,000 blocks creation. Bitcoin started with 50 bitcoins reward per block in 2009. Post that, this was the third halving event which decreased mining reward from 12.5 bitcoin to 6.25 bitcoins per block.
Please note that with every bitcoin halving event, the bitcoin supply decreases by 50%
And there has been a steady increase in the demand front where the number of people holding the bitcoin has been on a rise.
Simple supply, demand, and price equation – if supply decreases or demand increases – the price goes up.
Let’s understand what had led to a sudden increase in demand.
Nasdaq listed companies Micro Strategy and Square invested part of the treasury in bitcoin
This has led to a belief that the institutional money will start chasing bitcoin now. For both these companies, this strategy has paid off well with the increase in bitcoin price. And many other such investments have started taking place.
Greyscale is another large organization that invests in bitcoin and offers the investment in the form of shares to its clients. Greyscale investments in this space have increased to more than one billion US dollars.
For companies invested in bitcoin, look at Bitcoin Treasuries
Now with such developments, high net worth individuals and large companies are entering this space which is bringing in big money in the bitcoin and cryptocurrency world.
PayPal offering bitcoin on its platform to its 300+ million retails customers and 25+ million merchants:
PayPal has started offering bitcoin to its customers who could buy and sell bitcoin using their PayPal accounts now. These people can also use bitcoin and other cryptocurrencies like Ether, Bitcoin Cash, and Lite Coin to buy things from the PayPal merchant base. This service has started for PayPal users in the US and will soon be taken to other parts of the world.
PayPal has made it really easy for people to buy and sell bitcoin. With the sheer large number of PayPal customers, this one event has suddenly made bitcoin mainstream.
These above events have created enough buzz and interest in the cryptocurrency world and are leading to a sort of FOMO among institutional and large investors.