At the time of writing, the price of a bitcoin was getting close to a new high of $20,000 USD. What has changed since this high was last attained?
Covid Crazy
Numerous people’s behaviors have changed as a result of the Covid19 incident. The use of technology has become increasingly prevalent in daily life. Schooling, dining out, entertainment, employment, and the purchase of many goods and services are examples of activities that were formerly carried out physically but are now being moved into the virtual world. Using cryptocurrencies makes sense for this kind of agenda. They do so because the world is increasingly driven by technology. They may also be used to provide cheaper competition to the current financial system.
Acceptance
When Bitcoin last hit a record high, many institutions were denouncing cryptocurrencies as tools used by criminals to finance terrorism, money laundering, and the sale of illegal drugs. Bitcoin is now accepted for use on Paypal’s platform, and Mastercard and Visa are currently integrating cryptocurrencies with their credit cards. Many governments are considering issuing digital currencies that would replace their existing fiat money. Facebook also attempted to launch a cryptocurrency called Libra in collaboration with major banks and other organizations. This effort was unsuccessful, but the intention was clear. Except when the aforementioned institutions are committing the crimes, cryptocurrency is no longer a tool for criminals.
Adoption
Widespread or mass adoption is the key to any technology. Something will become more significant and in demand the more it is used. This is true regardless of how many people use it. The systems that support the product start to change as it gains widespread adoption. Take as examples the Apple iPod, Microsoft Windows, internet service providers, and electric vehicles. New industries and products that were not very useful prior to the widespread use of the original product will emerge with the emergence of new demand.
Vulnerability of Traditional Investments
Because the underlying economy is unrelated to the performance of these markets due to the Covid scenario and the depression that is developing, investing in stocks and bonds is becoming quite expensive and risky. The risk of real estate investment is higher than in the past due to the high level of debt as well as the erratic nature of rental income and the ability of people to pay their mortgages. Cash is a safe haven, but it also carries risk due to the prospect of inflation and rising debt. The idea of diversification dictates that these investments should be held to some extent, but there is currently a desire for an asset that complements these goods. The new asset in question is bitcoin. This product enables protection against high inflation, depreciating currencies, and excessive debt.