2022 proved to be a challenging year for the cryptocurrency market, with Bitcoin being no exception. Bitcoin began the year trading at $47,990, but due to several factors, including macroeconomic circumstances, rising interest rates to combat inflation, and the crash of stablecoin Terra, crypto exchange Vauld, and other institutions like Three Arrows Capital (3AC) and Celsius, it fell drastically to $17,000.
However, Bitcoin has shown a remarkable recovery this year so far. Despite ending the previous year with a bearish candle, Bitcoin has started this year with bullish and slow momentum. While it is still down 39 percent from the previous year, it has seen a 66 percent increase in the past three months and has surged by 104 percent from its lowest cycle in January.
Why Is Bitcoin Surging?
There are a few factors contributing to Bitcoin's recent surge:
Rising Inflation
With the inflation of the US dollar on the rise, investors are becoming increasingly concerned about the potential loss of value in their assets. Historically, certain assets have held or even appreciated in value during times of inflation, prompting investors to seek alternative investment options.
More recently, investors and institutions have turned to cryptocurrency, specifically Bitcoin, as a potential hedge against inflation. Bitcoin, a decentralized digital currency, is not tied to any government or central bank, making it less susceptible to inflationary pressures. However, due to its volatility, Bitcoin may not be suitable for all investors.
Increasing Adoption
There has been a significant increase in the acceptance and adoption of cryptocurrency as a legitimate payment method, with many large companies embracing it. In particular, the recent announcement by PayPal has caused a stir in the industry, as it now allows its vast user base to buy, sell, hold, and accept Bitcoin, one of the most popular cryptocurrencies. This move by PayPal is a significant step towards mainstream adoption of cryptocurrencies, as it opens up the use of digital currencies to over 20 million active merchants who can now accept them.
The acceptance of cryptocurrency by PayPal and other giant companies is a clear indication that digital currencies are becoming more widely accepted in the mainstream economy. This trend is expected to continue, as more companies seek to leverage the benefits of digital currencies, such as lower transaction costs and increased security. As such, it is crucial for individuals and businesses to understand the potential of cryptocurrencies and how they can be integrated into their daily operations.
Scarcity
Bitcoin's limited supply may also be one of the factors driving its rising value in the market. Unlike traditional currencies, which can be printed or minted endlessly by central banks, Bitcoin has a hard-coded limit of 21 million coins that can ever be created. This scarcity makes each Bitcoin a finite and valuable asset, much like gold or other precious metals. Moreover, as more people around the world learn about Bitcoin and recognize its potential as a store of value or a medium of exchange, the demand for it is increasing.
For example, in recent years, several major companies such as Tesla, MicroStrategy, and Square have announced significant investments in Bitcoin, further fueling its demand and price.
Is This The Right Time To Invest In Bitcoin?
Making a long-term investment in assets is often a prudent choice, as it emphasizes gradual returns over quick profits.
Given Bitcoin's potential to act as a hedge against inflation and preserve value, it may be a sound investment. Nonetheless, it is highly advisable to conduct thorough research before committing funds to any asset to safeguard your hard-earned money.
Overall, while 2022 was a difficult year for cryptocurrencies, Bitcoin's recent surge in value is a positive sign for the market. As investors continue to look for alternative assets, Bitcoin's potential for growth and its ability to hold value during times of economic uncertainty makes it an attractive option for those seeking to hedge against inflation.
(The author is the CEO and co-founder of Mudrex, a global crypto investing company)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.