1 June, AtoZForex, Vilnius — Bitcoin, the famous cryptocurrency that was allegedly invented by Satoshi Nakamoto in 2008, is booming again. This time, Bitcoin price peak reached almost $550. The digital currency is trading at $548.5 currently, which is a record for almost two years.
The price went up last week, hitting the highest point on Tuesday, where the year-to-date price for bitcoin has increased by 25 percent. In overall, the trading of Bitcoin has reached its peak since the August 2014. Yet, what caused the Bitcoin price surge? AtoZForex learnt that there actually three factors that play a crucial role in the recent rapid escalation.
The main feature of cryptocurrency is that, unlike usual currencies, which can be easily printed by governments, the new bitcoins have to be “mined” or found in order to be in a circulation. Therefore, the supply of the online currency is considered as tight.
As new bitcoins are discovered, they are instantly added to large transaction database – the blockchain. The miners are getting the set of bitcoins for each block they discover. The nature of bitcoin is deflationary, meaning that fewer bitcoins are discovered as time goes on.
Earlier in 2012, in order to prevent bitcoin inflation, the miners used to receive the halved bounty of 50 bitcoins. A similar situation is supposedly going to happen again in the upcoming months. The rewards for miners can drop from 25 bitcoins to 12.5 bitcoins, which will possibly lead to further tightening of supply of the online currency. The U.K. managing director of blockchain company Billon Group, James Lynn, commented:
“Speculators have been pointing to impending rises for some months, citing the impending halving of rewards for miners. I think, however, that’s been priced into the market on an on-going basis.”
The threat for Asia
Some experts believe that the yuan, the Chinese national currency, can be threatened by the strengthening bitcoin, as the Bitcoin price peak approached. The depreciation of yuan could happen due to the increased investments in bitcoin. The research analyst for digital transformation at Frost & Sullivan, Vijay Michalik, stated:
“Signs indicate Bitcoin’s price has become linked to a number of macroeconomic factors in China. It highlights growing concerns about yuan currency deflation, as bitcoin’s appeal has grown as an alternative asset class for a population deprived of many investment choices.”James Lynn is also commented on this matter: “The most likely explanation appears to be linked to market confidence in the Asia region, with low confidence in local currencies providing a major boost to bitcoin demand.”
Bitcoin is becoming more strong
The developers of Bitcoin have been working hard lately to improve the quality and reliability of the cryptocurrency transactions and the currency itself. Vijay Michalik commented:
“Bitcoin’s seen some of the developer turmoil subside over the past few months.”
According to the Frost & Sullivan research analyst’s opinion, the Bitcoin can become easier to use as the new technology had been developing rapidly. For example, the Blockchain recently delivered an alpha version of the Thunder Network. This network is ‘faster, cheaper, and more functional’, according to the official website of the company.
If you are trading the famous cryptocurrency, be sure to pay attention to Bitcoin’s strengthening quality and position in the market. As it will affect your trading decisions, profit and loss. For the new traders to Bitcoin, it might the chance to tag along the cryptocurrency’s rally and enjoy new investment opportunities.
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