The supply of new coins is also slowing down because the reward that bitcoin miners receive for verifying transactions on the blockchain halves roughly every four years – it fell from BTC12.5 to BTC6.25 last May. The maximum number of bitcoin that will ever exist is set at 21 million (unless the protocol changes), and there are already about 18.5 million in circulation. In the face of this threat, investments like bitcoin are being consider a store of value. Indeed the US Federal Reserve last year signalled it would be slightly more tolerant of rising prices when it relaxed its 2% inflation target. This could drive up inflation, which in turn lowers people’s purchasing power.

Nobel laureate Robert Shiller has suggested that the 2017 bubble could have been linked to the fact that there were no bitcoin futures at the time.īitcoin's rebound: 3 reasons this bubble may not burstīesides all this mainstream enthusiasm, the carnage brought by COVID-19 has led to huge stimulus packages from governments around the globe and many central banks printing more money. Bitcoin futures mean that investors can speculate on falling prices by “going short” on the cryptocurrency. The introduction of financial products such as bitcoin futures and options, as well as blockchain-related funds, has allowed investors who might otherwise have been fearful of volatility to get involved. Bitcoin digital wallets, keys and exchanges are easier to access and there is a lot more reliable information out there than before.

With more and more ways of using bitcoin, it should mean that more people will want to hold it.īitcoin has also become much more mature since the days when it was used mainly as a method to purchase drugs on the dark web on Silk Road. In October it announced a handful of bitcoin-related credit and debit cards with leading crypto exchange Coinbase. Possibly most importantly, Visa has been warming to bitcoin. The number of vendors accepting bitcoin as a form of payment is growing rapidly. Rival digital payment firm Square reported in November that more of its Cash App users are buying the digital currency, and buying more on average than before. PayPal now allows customers to buy, hold and sell bitcoin directly from their PayPal accounts. This all helps to increase trust in the cryptocurrency and indicates that it is becoming more mainstream.īitcoin has also been backed by a few large consumer-facing payment names. This time, big names such as billionaire investor Paul Tudor Jones and insurance giant MassMutual have invested heavily, while even former naysayers like JP Morgan now say that bitcoin could have a bright future. The 2017 bull market had all the signs of a classic financial bubble and investors who were buying in “fear of missing out” (FOMO). In 2017, the cryptocurrency ecosystem was dominated by individual retail investors, many of whom were attracted to bitcoin’s scarcity and the fact that it stood outside the global financial system. This was not the case during the last bull market in 2017, in which the bitcoin price rose about 20-fold to almost US$20,000, only to slide back to the low US$3,000s a year later. One reason for the massive price rise is that there has been a big influx of investors from large-scale institutions such as pension schemes, university endowment funds and investment trusts. Why is Bitcoin's price at an all-time high? And how is its value determined?

Bitcoin 2017 graph