The value of Bitcoin and its exchange rate against traditional currencies continue to rise, attesting to its rapid democratization and its growing legitimacy as a digital financial asset. Major financial institutions are preparing themselves for mass adoption of Bitcoin and drawing inspiration from Blockchain.
At first ignored, cryptocurrencies, and especially Bitcoin, are now garnering the considerable interest of politicians, investors, and ordinary people. More and more, Blockchain is handling what people consider true currency.
From Edgy to you, here are the 3 main reasons why Bitcoin is now a legitimate currency:
1. Bitcoin Attracts Institutional Investors and Average Joes
Bitcoin is the top cryptocurrency by market capitalization, estimated at around $10 billion. This is not the prerogative of institutional investors and major players, as single-family offices and small investors are adopting Bitcoin, looking to diversify their investment portfolios.
In addition to a money transfer tool, Bitcoin is more and more leveraged as a long-term store value. As a speculative investment, risk is present because of the high volatility of Bitcoin prices. But this same volatility is a simple opportunity: to earn money with Bitcoin, you have to buy Bitcoins and sell them at a higher price. Of course, the difficulty lies in anticipating price fluctuations.
2. Bitcoin as a Haven Asset
Bitcoin reached then surpassed gold parity for the first time, with, at press time, one BTC worth more than gold, valued at $1282,92 USD and 1,233.83 respectively. Recently, Bitcoin has gained a status of a new financial safe haven. What other currency can say that?
One of the main theories of the spectacular increase in Bitcoin value is the same for any merchandise: the old law of supply and demand. The world supply of Bitcoin being fixed and limited, demand explodes, hence the rise in prices. This increase in prices encourages the owners to hoard their Bitcoin, which reduces the supply even more.
With a capped total of 21 million units, Bitcoin would only gain value as time goes by, which make it a candidate to replace gold as a hedge against tribulations in the financial world.
3. Impending Bitcoin ETF Decision
The rise in Bitcoin prices may also be due to speculation about the Securities and Exchange Commission decision the ETF Bitcoin launched by brothers Tyler and Cameron Winklevoss, founders of the platform Gemini, three and a half years ago.
After having postponed the verdict several times, the SEC will have to decide definitively before March 13. This ETF, if approved, would boost the legitimacy of Bitcoin further and make it more accessible for individuals and fund managers.