If a company owns an asset, it has residual value because it still has some utility even if it can no longer have a use case as initially intended. Companies maintain assets over their lifetime because they retain some economic value. For more information about cryptocurrency trading, you can visit guerillacoin.com.
There is a significant difference between bitcoin and assets such as homes, land, cars, companies etc. Bitcoin’s bullish run is skyrocketing and is sustaining for a very long time. In 2021, bitcoin had significant surges in its spot value, further increasing bitcoin’s floor value from $10000 to $30000. Let’s discuss the sustainability of bitcoin’s bullish run.
Why is bitcoin so bullish?
This question has raised the interests of everyone. Various theories have related bitcoin’s bull run to global warming, Donald Trump, Venezuela, etc. However, these theories are not convincing enough and have no solid-backed evidence to support them. A classical econometric theory proves that bitcoin’s value depends on the market’s total demand and supply.
The total number of bitcoins supplied every 10 minutes is 6.25, which makes it difficult for economic shocks to affect it to a large extent, provided that there is no cataclysmic global event which affects all nodes holding bitcoin uniformly at one time or a significant portion thereof. To calculate the absolute value of bitcoin, we need to consider the supply and demand of bitcoin as well as its historical trends. The only thing needed to realize the profitability of bitcoin is time. Time represents pure patience, one of a trader’s most essential qualities.
How long will bitcoin be bullish?
The demand for bitcoin is increasing rapidly and is at an all-time high. The demand for bitcoin is influenced by the speculative market, which triggered vast amounts of investment in cryptocurrencies. A large part of it was done by institutional investors, which can be considered a significant factor in the bullish run of bitcoin.
However, bitcoins can help them in achieving their financial freedom faster. Bitcoin is an innovative technology which needs to be adopted fast. It can help them in saving and saving money also. If there is better technology in the future, we can still use bitcoin as a medium of exchange until it reaches its full potential. If the bitcoin price goes up, people will likely be interested in buying bitcoins and trading them among themselves.
The demand for bitcoin has been increasing at an exponential rate. Moreover, the influence of the demand for bitcoin will continue on the rise as more countries adopt it in their systems for payment and settlement purposes. In short, the bullish run of bitcoin will sustain forever unless or until government authorities utterly impose a complete flash ban on the use case of these privately mined digital currencies like China did in 2021.
Why can bitcoin’s bullish run go long?
- Pent-up demand:
Bitcoin’s supply will never meet the demand for it. However, as some of you may have noticed in the chart above, the demand for bitcoin has been growing exponentially since 2013. Because of investors’ increasing interest, more people are buying bitcoins.
Each time a significant financial crisis occurs, they take their money out of paper money and into bitcoin as they know its value can’t decline because there will be a hard cap on its supply. It is like investing in gold which may be used as a store of wealth or as a payment instrument.
- Mass adoption:
Bitcoin has been adopted by various countries like Japan, Russia, and the United States etc. Many major financial firms have started investing in this cryptocurrency and are short-term bullish on it. However, the supply of bitcoin is finite and will be capped at 21 million bitcoins.
The amount of bitcoins staying in circulation is just around 17 million at present, and the rest are kept as a hedge for future funding purposes or are lost in the form of hard drive failures or other reasons. However, since there will be no more than 21 million bitcoins ever to exist, the value of each bitcoin can rise as demand increases over time.
- Scarcity drove by Bitcoin halving:
The price of bitcoin is highly dependent on its supply and demand. To maintain this balance, bitcoin has a scheduled halving event. Halving of bitcoin means that the supply rate of new bitcoins coming into the system each day will be decreased by half. A similar situation occurs in the mining industry when a mine becomes unprofitable to run due to high costs or lack of valuable resources, and they sometimes decide to shut down.
Conclusion:
Like any other asset, the price of bitcoin is also driven by its supply and demand curve. Therefore, the rising demand for bitcoins may offset their reduction in supply and vice versa, thus preventing any significant change in prices or allowing them to rise if there are no significant changes in their fundamentals.
