2017 could go down in history as the year of the crypto currenciee. Since the beginning of the year, the total value of the crypto payments could rise 876% by the time of 16 October as measured by market capitalization. The stock market took more than 20 years to generate the return that digital currencies made in just a few months.
Although Bitcoin was not as strong as some other crypto currencies, it is still a leader. The world’s most popular digital currency has risen by nearly 500% over the past 12 months and has reached market capitalization of 97 billion US dollars. In 2015, Bitcoin was still 3 billion US dollars. Given the momentum that pushes Bitcoin up, it seems posible that the crypto currencies could soon reach a market capitalization of $ 100 billion.
You may be wondering why digital currency such as Bitcoin can go so high. Some growth drivers, of course, are much easier to understand than others, but essentially they are due to seven factors.
1. The potential of Blockchain technology
The most logical reason is the potential of the Blockchain technology, which is based on Bitcoin. The Blockchain is nothing more than a digital and decentralized storage location in which transactions are acquired without intermediaries.
The Blockchain is usually an open source network. This means that it is almost impossible to modify data without someone finding it out. This security aspect makes the future of the Blockchain as a payment platform more interesting.
2. Upgrade the Bitcoin-Blockchain for larger companies
Bitcoin’s investors should look forward to a software upgrade that was introduced in two separate currencies, Bitcoin and Bitcoin Cash, more than two months after the Bitcoin spin-off. This software upgrade resulted in some data being removed from Bitcoin’s Blockchain to increase capacity and reduce transaction costs. At the same time, processing times were shortened. With this upgrade, business users should be addressed who would like to test Blockchain in pilot projects.
3. The US dollar falling
The US dollar fell to a multi-year against the Euro, which is generally good news for American exports. This is not so great for investors if they have cash. When the dollar falls, investors usually look for the security of gold because it is a finite resource and a store of value. Bitcoin is also seen as a finite resource since the protocol limits the number of degradable coins to 21 million. Bitcoin had thereby benefited from the fact that it was viewed as a safe investment.
4. Institutional investors begin to show interest
There is also a certain interest from institutional investment firms such as Fidelity and Goldman Sachs (WKN: 920332). Abigail Johnson, CEO of Fidelity, recently announced that its company has successfully depleted Bitcoin and Ethereum. Fidelity gives its customers access to crypto shares through the website.
Goldman Sachs also played with the idea of acting with Bitcoins, as liquidity and interest in cryptic stimulus increases. This may not have been an easy decision for Goldman Sachs, as most of the customers are companies and not individual investors.
5. The payment platform
Another reason for investor enthusiasm is the potential as a payment platform. Since 2014, a handful of brand makers have accepted Bitcoins as a means of payment, while some smaller traders are currently accepting Bitcoins or trying to accept them in the future. Updating Bitcoin’s Blockchain technology should help speed up transactions and attract new traders.
6. The regulations in China could change
Recently, the speculation ramped that China could change its view on cryptic stimulation. Last month, China announced that Bitcoins will no longer be sold. They called it a possibility for fraudulent action and noted that they wanted to close down the local crypto selling exchanges. Since there was a lot of trading in China, the investors were now worried. There are rumors, however, that this harsh attack might turn out to be temporary.
7. The fear of missing something
The emotions have caused Bitcoin to continue to rise. I call it the fear of missing something. This means that people have bought Bitcoins blindly without really understanding what it is or what the Blockchain is actually. They just saw the massive gains in the last couple of years and did not want to miss this train.
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