Bitcoin growth. How can it be explained and when will it end?

The reason for investors' newfound faith in cryptocurrency has to do with who is investing in it.

In 2017, Bitcoin's price was boosted by individual investors who believed in the future and value of the technology. However, Bitcoin was not considered a safe investment at the time. It was not backed by any assets or government, and the lack of significant support increased the risk when investing in the cryptocurrency.

In 2020, however, a lot has changed, and Bitcoin has attracted interest from institutional investments. Governments had to build up debt to support the financial burden of a closed economy and cut production.

Expenses of stimulating the economy made many people fear much higher inflation, and rightly so. To protect themselves against this inflation, investors looked for assets that either retain their value or rise in value.

Many assets are considered a store of value, such as precious metals like gold or other things that have a limited supply. As for gold, we know that it is a scarce resource, but we cannot be sure how much of it exists.

And this is where the Bitcoin situation is different. Bitcoin code includes the number of units that can be mined, which makes Bitcoin the only asset on the planet that we can prove has a limited and fixed supply today.

"Covid has completely changed the rules for the use of invested capital. Nations and companies are hedging their assets with cryptocurrencies like never before," says Adam Grunwerg.

Square and Paypal recently added cryptocurrencies to their offering. Many major newspaper publishers and financial media focus on cryptocurrency and report on it daily. Such attention only increases interest in cryptocurrencies and gives them more legitimacy in the minds of investors.

Cratos is well aware of the hype around "number one cryptocurrency", but we encourage all participants to be mindful when investing. Therefore, we decided to analyze the issue objectively by selecting different opinions and assumptions of experts.

Assumption: Bitcoin will continue to grow

An important factor that speaks in favor of the continued growth of Bitcoin is the problem with its supply since only a limited number of Bitcoins is available.

Chris Thomas of Swissquote Bank noted that "the imbalance between supply and demand is incredible." Institutional buyers are picking up large sums quickly, and the demand does not seem to decrease.

"Nobody knows how far this rally will go, but at some point, there is always a correction. Anyone who pretends to know more than this is deceiving himself or others. Long-term predictions, however, are simple. Bitcoin will continue to rise with periodic adjustments. Investors should plan for years, not weeks," said ZebPay in a statement.

Glassnode reports that miners' wallets such as Lubian.com, F2Pool, Binance Pool, and Poolin collectively hold over 33000 BTC. Thomas added: "Miners need to cover their operating costs [..] it's clear that we're going to continue to grow pretty significantly for quite some time."

Thus, as this trend continues, BTC prices will continue to rise, but the limited supply of this crypto asset will have its noticeable consequences, which we advise paying attention to.

Assumption: Bitcoin will fall

Some argue that Bitcoin can be perceived and behave like a gold standard, only for cryptocurrencies. After all, gold has a reputation as a safe haven for investors in difficult economic times.

However, a significant part of what drives Bitcoin and gold prices is pure speculation. The value of bitcoin is not directly related to any obvious phenomenon in the real world (for example, fiscal or monetary policy). It can rise or fall in ways that are difficult to predict or even explain.

For example, the end of the Brexit saga is almost here. It's the same with the coronavirus pandemic. If the economic news flow from the real world is positive, stocks will rise again, while the value of alternative assets such as Bitcoin and gold will drop.

However, even in the worst economic times, some experts tend to invest in stocks and stock-backed assets such as funds and trackers, while there is no such benefit from owning bitcoin and gold because they are inactive, inert assets.

Bitcoin price prediction is a hot topic right now as everyone wants to know how far the coin will go and when it is safe to invest. However, there are no guarantees that one of the two assumptions described above will happen. We recommend paying attention to the facts and events of the world economy.

In this article, we tried looking from different angles at how the cryptocurrency might behave in the next year. In the new year, we wish all investors to make conscious economic decisions and get maximum profit from them.