Market instability is attributed to several factors, such as demand and drastic economic changes. It affects traders and consumers when the prices of goods soar up, but the value of money remains the same. There’s a need to address the matter through appropriate interventions.
The government may draft policies to resolve underlying issues causing economic downturns or inflation. While it can be inherent to the nature of any economy, including the crypto industry, some things can be done to make the business environment a fair playing field for everyone.
Perhaps one time or another, you have thought about why the price of bitcoin continues to increase. What explicitly triggers this phenomenon? Many investors don’t even have any idea about this, resulting in erroneous decisions. The best practice is to regularly monitor the prices of cryptocurrencies and consider facts as guides in trading transactions. Below are some of the crucial facts explaining why bitcoin prices may continue increasing.
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- Merchants Accept Bitcoin as a Mode of Payment
As many businesses adopt bitcoin as a mode of payment, the value of the cryptocurrency also increases. It works to the advantage of both business owners and consumers as it makes transactions more convenient. Anytime, people can pay for their goods or services using bitcoins. Various payment processors like PayPal have signified their intention to allow millions of account holders to purchase, sell, keep, and accept cryptocurrencies as a form of payment. This move would expand the crypto market, causing specific prices to adjust accordingly.
- Many Investors are Shifting to Virtual Currency
Many people are shifting to digital currency because of the sharp inflation rate hitting economies across the world amidst the pandemic. This can result in the cryptocurrency market surging, and prices may change suddenly. While the purchasing power of various fiat currencies is affected by economic downturns, cryptocurrencies may remain unbothered. Investors and traders continue to do business, and this strategy pays off in terms of gains and protection of assets. The crypto industry in the present economy serves as a haven among many investors. They acknowledge that it’s a highly speculative and volatile industry, but it guarantees benefits that could not be afforded from a struggling physical market. Bitcoin’s increased value is attributed to this significant shift of many people.
- Cost of Production Continues Rising
Bitcoin mining has grown exponentially due to the large number of trading transactions in the network. As a result, it impacts the price of the cryptocurrency. Many miners now have a more difficult time puzzling the mathematical algorithms to earn the tokens or incentives. Because of this challenge, the marginal cost to produce bitcoin through mining increases. The logical consequence is the higher value of bitcoin since miners have to exhaust all necessary efforts to increase the number of cryptos circulating in the network. Relevant research noted that the price of bitcoin is closely related to the marginal cost of production.
- More Institutional Investments are Being Made
The current economic climate has forced many investors to find alternatives that could secure their assets. One venue for this purpose is using bitcoin as a safe-haven asset. Since the cryptocurrency is not directly affected by the economic turmoils of the physical market, it provides security and hopes of growing assets. Most recently, publicly traded companies began converting cash over to bitcoin to have a secure store of value. This and many other actions have been rooted in the struggling economy that investors are worried about, resulting in possible losses. As a consequence of this shift, bitcoin’s price is also adjusting to meet reasonable criteria.
Bitcoin is one of the virtual currencies that are limited in supply. This scarcity also contributed to the price changes. The production process is a massive factor in why this phenomenon exists. It is essential that you monitor updates on bitcoin’s value because that would guide making favorable decisions.
Many online resources provide news and recent information on how the cryptocurrency market is making progress each day. You’ll do better as a trader when you are well-informed.