In January 2021, the value of the cryptocurrency, Bitcoin, soared to above $40,000 for the first time ever. And, as the largest and leading cryptocurrency, it’s expected to continue to reach an even higher value in the following months. But as cryptocurrencies are an emerging, volatile market in the finance sector, and are known to be a risky investment, how and why has Bitcoin hit this new high?
In December 2020, Bitcoin first reached the record-breaking value of $20,000. Gaining 300% last year, it has since continued to rise in value. Subsequently, there has also been a sharp rise in the price of other digital currencies, with Ethereum gaining 465% in 2020 – securing its position as the second leading cryptocurrency on the market. Some analysts are equating the rise of cryptocurrencies to the drop in the US dollar, which has seen its biggest annual loss since 2017.
Experts have also considered that the attention drawn to Bitcoin has come from big investors looking for a quick profit as part of their investment strategy, as well as veering away from the traditional global stocks and shares markets, and prior safe havens of gold and cash, amidst pandemic-driven uncertainty. Due to the coronavirus crisis, some investors have reassessed cryptocurrencies and their viability as a long-term investment.
The spark in interest in cryptocurrency has also been increased due to its growing support as a form of payment. Starbucks and Microsoft are amongst the first companies speculated to accept it as a payment method in the future, but it is PayPal in particular that has hit the headlines, becoming a confirmed recent supporter of the digital currency as a form of online payment.
In October last year, PayPal announced that its customers would be able to buy and sell using Bitcoin via their PayPal accounts, with the opportunity to use the digital currency with over 25 million sellers that accept PayPal transactions. They can also use PayPal as a digital wallet to store their cryptocurrency. Despite the volatile and less well-regulated nature of the cryptocurrency market, PayPal was granted permission to allow Bitcoin as a currency from the New York State Department of Financial Services. As an immediate result to this news, the price of Bitcoin then rapidly rose, and has sustained this increase until now, at our time of writing.
Online trading platforms have also added to the rise in the value of Bitcoin, offering more ways and strategies to invest in the cryptocurrency. One way that has gained popularity amongst investors is Contract for Difference (CFD) trading. For example, Skilling allows you to trade CFDs online in several instruments, including the most popular cryptocurrencies, as well as other lucrative altcoins. This gives investors the opportunity to trade more extensively, with tight spreads and clear pricing structures, and exchange on the basis of price speculation. All of which makes the investment in Bitcoin even more enticing.
Despite the huge surge in price, experts are advising investors to expect what they deem as a dramatic correction to the value of Bitcoin, which may be a cause for concern. This is based on the peaks and troughs that the market has seen since the creation of cryptocurrency in 2009, and its evident volatile market. In particular, the value of Bitcoin is expected to mirror that of the year 2017, where the digital currency saw an extreme low and its value fell below $3,300 compared to its bullish run in the same year, reaching the massive high level of $20,000. The volatility of Bitcoin, and the fact there is no centralised governing body that would seek to maintain the high price of the currency, forms the prediction that this rising and falling nature of Bitcoin is expected to play out over the coming months of 2021.