Why Bitcoin Exploded (Why Bitcoin Is On Fire)

Why did Bitcoin explode? Today is December 18th, after experiencing the bear market last year, it entered a bull market in January 2020.

From the end of 2017 to the end of February this year, the entire industry was in a frenzy after Bitcoin broke through the $10,000 mark. However, there has been no movement since mid-March.

According to statistics, as of the time of writing, Bitcoin has risen to around $14,000. With Bitcoin’s price crossing above 13,000 points in early May and breaking the yearly low, it has now returned to around $12,000.

So why is this phenomenon happening now? Let’s take a look at the reasons below. 1. Global economic slowdown leads to increased demand for cryptocurrency.

On November 15, 2018, due to the US government’s concerns about inflation and currency oversupply, the Federal Reserve launched its “quantitative easing” plan, stimulating the prices of gold and silver. Subsequently, Bitcoin surged. It is estimated that within the next five years, gold or silver may exceed the level of the S&P 500 index in 2008. In addition, due to the impact of US monetary policies, investors will invest more funds in Bitcoin as a hedge asset. Since 2020, central banks of various countries have taken actions to support digital currencies. Traditional financial institutions such as Facebook have also announced their exit from the market, causing Bitcoin prices to fluctuate significantly.

2. Blockchain becomes a new benchmark: China’s banking industry is exploring the use of blockchain technology.

On August 24, 2015, the “Securities Times” published an article stating that “blockchain can achieve more efficient service management and transactions”, but there is too much uncertainty behind it. Although the increase in these uncertainties means that some people believe that Bitcoin can be widely adopted and that it may be a good thing for many enterprises.

In early 2019, an anonymous person told the New York Post that he saw a project called “Bitcoin” (Bitcoin in the Binance code). At that time, he said on Twitter, “I found someone who did a project with it- Bitcoin mining.” This idea made many people doubt whether Bitcoin truly created a store of value and emphasized that people should view it as a viable investment tool. Later, the individual stated that if he really had BTC, he would buy more BTC. However, that night, he said he didn’t actually hold any BTC, so his position became less and less.

4. Today’s early news, Bitcoin experienced a short-term diving trend. Although the price of Bitcoin fell to $9,250 at one point, it continued to rebound and stabilize in the range of $9,000-9,400 in recent days.

Why did Bitcoin catch fire

Editor’s note: This article is from the “Hello Bitcoin” (ID: hellobtc) column, written by the Master of Wu Huoqiu, and authorized for reprint by Odaily Star Daily.

After reaching an all-time high in December last year, Bitcoin has been on a continuous upward trend. Since the beginning of this year, with the price surging to over $20,000, Bitcoin has also skyrocketed by about 50%. So why has there been such a large increase recently?

First of all, from a technical point of view, Bitcoin is currently running in a very unstable manner. It itself is a store of value asset, but its transaction fees are much higher than the prices of most mainstream currencies. Combined with its volatility, its price is relatively easier to manipulate and control, as it carries no risks. Secondly, due to Bitcoin’s decentralized nature and its characteristics of immutability, it has become a payment method and a storage tool in people’s daily lives. Therefore, it can be said to be the safest wallet in the entire digital world. However, this does not mean it cannot be used or exchanged for fiat currency, and this mechanism is too complex for many ordinary people. Finally, let’s take a look at a recent news: “US President Trump Announces Acceptance of Cryptocurrency Payments.” This is the first time a well-known figure, after Jerome Powell, the former acting chairman of the Obama administration, views him as the “richest Bitcoin holder.”According to Bloomberg, the Federal Reserve plans to reduce its scale starting from the end of this year and lower interest rates to below 0%. At the same time, some countries are considering allowing central banks to conduct cross-border payments through CBDC. However, the implementation of this idea may bring a series of problems:1. What is the difference between Bitcoin and gold? According to Coinmarketcap’s data, as of the end of November 2018, there is a global cash flow of about $90 billion. If calculated in US dollars, there are only 21 million stores worldwide that can accept BTC payments, and this proportion has only increased by 3% in the past year, which means that there are only about 20 billion transactions occurring every day, an average of less than 50 points per day. Unless you invest all your funds in it, the balance in your bank account will decrease by 99% or even more, resulting in huge losses. The second reason is that Bitcoin has become a high-risk investment product, and more and more people are choosing to invest in Bitcoin rather than other cryptocurrencies. This has also led many people to have fantasies about Bitcoin, believing that it may be a safe haven in the future financial market and hoping that it can help them get through difficulties. However, such a situation is still relatively rare. The third factor is that Bitcoin, as a virtual commodity, although it has a significant bubble in the traditional market, there are still some users who are skeptical about it at this stage. For example, many investors do not believe that Bitcoin is an effective store of value means.