Why Bitcoin Appreciates (Why Bitcoin Grows)

08/17/2023 17:49 • AI & Tech Insights • 46 views

Why does Bitcoin appreciate? In the development process of Bitcoin, due to people’s high understanding of digital currency, many people have begun to see blockchain as an emerging technology.

As time goes on and applications are being implemented, more and more people are realizing the importance of blockchain and its value. Why does Bitcoin appreciate? What are the reasons for the appreciation of Bitcoin?

1. Bitcoin is a “payment tool on the Internet” that achieves peer-to-peer transactions through the use of blockchain technology.

2. When the number of users on the network exceeds a certain amount, users can use encrypted wallets to transfer Bitcoin between each other; In one year, users can use Bitcoin to purchase goods and services, thereby increasing the usage rate of Bitcoin.

4. Since January, the price of Ethereum has been rising all the way and has now surpassed Litecoin, becoming the most watched asset after EOS.

Why does Bitcoin grow

Bitcoin’s growth is caused by two reasons. First, in December 2018, due to the sharp drop in prices, the demand for Bitcoin surged; the second reason is the entry of institutional and retail investors into the cryptocurrency market. These factors have led to an increase in the price of Bitcoin.

According to recent research by Chainalysis, Bitcoin’s trading volume reached a historical high of about 1 billion US dollars in the third quarter of 2019. In addition, with the impact of events such as the outbreak of the COVID-19 pandemic and the increasing popularity of the Bitcoin network, the total supply of Bitcoin has also decreased.

However, compared to the level of 2017, the market share of Bitcoin is still low, which suggests that some people consider it a disaster because they have not transferred their funds to other assets. But if we consider this issue as a cyclical phenomenon, then we need to pay attention to a fact: Why does Bitcoin grow? Why does it have such a large investment return? Why does it generate such profits? Here are several main reasons:

1. Due to regulatory considerations, many portfolio managers are considering investing funds in Bitcoin and other cryptocurrencies to obtain returns, and this part of the risk is usually considered as “inflation” of Bitcoin.

2. Over time, more institutions have started to pay attention to Bitcoin, making its value more predictable. For example, Fidelity has deposited its clients’ funds in Bitcoin and converted their wallets into other currencies to earn higher interest rates and continue to hold them.

3. Although more and more traditional financial institutions are involved in this field, Bitcoin is still in its infancy. The frequency of using Bitcoin as a payment tool has risen to once every four years, and it is now gradually converging with types of precious metals such as gold.

4. “Stable” Bitcoin reached a high point of over $19,000 in early 2020, and has been declining since then. This downward trend may indicate that Bitcoin is returning to below $10,000. Although this trend may continue in the short term, Bitcoin does have some growth potential in the long run.

5. “Increase in volatility and uncertainty,” and “technical problems—lack of fundamental theoretical or economic evidence to suggest that at some point, an increase in volatility and uncertainty is inevitable.” Therefore, Bitcoin can make good use of its advantage as a global reserve currency while also meeting daily needs.

6. Bitcoin has the inherent characteristic of high volatility. When you use it to buy goods, you do not need to know if the price will skyrocket or depreciate.

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Why Bitcoin Appreciates (Why Bitcoin Grows)

Why does Bitcoin grow

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