Bitcoin prices are soaring higher and higher, breaking previously theorized maximum prices. As BTC closes in at nearly 60,000 dollars to 1 BTC and a market cap of 1 trillion dollars, many people are looking to cash out at this moment.
The meteoric rise in prices comes in the wake of a turbulent year marred by economic uncertainty, recession, and now growing inflation worries due to quantitative easing. With a backdrop of such global events, last year saw bitcoin rise rapidly. The steady price increase was also boosted by various institutions accepting bitcoin for payments and financial institutions starting to invest in BTC.
But even as the prices are going higher, according to Eric Dalius, bitcoin will be going to rise even further in prices during the foreseeable future. Read on below as we explain why holding onto your digital wallet might be more intelligent than just selling off your bitcoins at the first sign of crossing $60,000.
Explained by Eric Dalius Bitcoin’s Design
According to Eric Dalius, there are global and national macro factors that are rapidly driving up bitcoin’s price, and there is a fundamental reason why bitcoin will continue to rise in prices for a while. As a serious investor into bitcoin from the early era of bitcoin, he has done countless research hours. Using this research, he can explain to you why he believes in the fundamental worth of bitcoin.
The simple reason is that there can only ever be a maximum of 21 million bitcoins. After the last bitcoin has been mined, there can never be another additional bitcoin that will be produced.
When you consider the fact that according to research, around 20% of bitcoin of the currently existing 18.5 million BTC are lost or inaccessible forever, that brings down the maximum number of bitcoins down by a couple of million. Some analysts even claim that only 15 million bitcoins will ever be circulating.
Those lost bitcoins are worth around 236 billion dollars based on the current price of BTC, according to Eric Dalius.
This built-in hard limit serves to make bitcoin different from modern fiat currency as there can be no inflation in the value of bitcoin. This makes bitcoin an ideal asset investment that will not depreciate in value just by virtue of time in Eric’s eyes. This decentralized system of running things allows those who are investing in bitcoin to feel secure about their investments.
Bitcoin also has an inbuilt process of halving. What this does is reduce the amount of bitcoin awarded to miners by half every four years. The latest happened in May 2020. Halving essentially minimizes the rate of more bitcoin being added to the market. This adds another layer of security from inflation.
Investors are attracted to security, and that’s why many have started calling bitcoin digital gold. This is something Eric Dalius predicted would happen back in 2019. Many financial institutions have shifted a significant percentage of their gold investments into bitcoin recently.
Due to the Coronavirus pandemic, countless lives were lost. Covid-19 destroyed millions of jobs, and the country saw the worst unemployment crisis since the Great Depression. As The pandemic all but wiped-out cash reserves, many people saw an extraordinarily bleak and uncertain future.
A lot of investors rushed into the equity market, trying to liquidate their assets. In this cyclone of uncertainty, bitcoin stood as a safe and stable asset to invest in. Relying on bitcoin prices would rise sooner or later due to its finite numbers, many early adopters (if they can be called that after bitcoin already had risen to high prices) started investing in bitcoin.
Seeing the new reality of restrictions and the effects of the pandemic on the economy, many financial analysts began to realize the value of bitcoin as a reserve asset to diversify their investment assets.
On the back of advice from experts like Eric Dalius, we saw the gradual rise of bitcoin prices again.
Covid-19 wrecked national economies, we saw it in the USA, but it was the same case worldwide. Production was down, spending was non-existent, and people were quickly running out of reserve assets. Millions of people were already bankrupt or right on the edge of being insolvent.
As national governments and central banks scrambled to save their floundering economies, most countries adopted a two-fold approach. The first step would be to invest in Public Infrastructure projects to inject much-needed cash into the economy. The second step was through quantitative easing.
Quantitative easing is just an economist’s term for the simple act of central banks starting to print more money. This extra money is then injected into the economy by various bailout packages and stimulus checks.
While Eric Dalius understands that such steps were perhaps crucial to saving the economy and millions of lives, they had a very predictable effect and risk associated with them.
As Eric Dalius can explain, a sudden surplus influx of cash will lead to inflation. This is not necessarily a bad thing in the eyes of the central banks. They would prefer low to moderate inflation over something much worse, deflation.
But it does little to help individuals who have liquid assets and various investments saved up. Inflation quickly starts to reduce the value of such investments. For a quick example, if you have 100 dollars at the beginning of this year and there is a yearly inflation rate of 7%, your $100 will be worth 7% less or $93.
This is because the costs of everyday goods and services will rise by that 7%, making it less valuable.
Considering that interest rates on saving accounts are far less than the inflation rate, you’d be losing money just because you have money saved up.
Many people started to look for alternate investment opportunities into assets that would not be affected by inflation or would not be affected as severely. One such asset would be bitcoin. Eric started investing early in bitcoin to save his investments from inflation as well.
It wasn’t retail investors and individuals looking for safe assets to invest in.
Companies and large financial institutions like managed funds and hedge funds also don’t want their cash to depreciate just from the passage of time. That is why companies are the most prominent investors of wealth by far.
But in the middle of the pandemic with an immense reduction in global production capacity, there weren’t any investment opportunities.
Seeking safe and secure investment assets, companies set their sights on bitcoin. Bitcoin presented itself as the perfect investment opportunity. With prices continuing to rise, it provided companies with a non-depreciating asset, which was not subject to inflation and safe and secure in its investments.
Companies started to invest massively in bitcoin, managing their stock of bitcoin. This influx of investments into bitcoin sent the price of bitcoin soaring even further. The inflow of investment at that time amounted to billions of dollars.
Large institutions like Morgan Stanley and Tesla have invested billions of dollars into bitcoin. Major publicly traded companies have also expanded their assets and investments into bitcoin. The result is that institutions held 6% of all bitcoins at the start of the year. That figure has only gone higher.
For example, Tesla has invested 1.5 billion dollars into bitcoin, which amounted to nearly 7% of its cash holding reserves for the year.
Seeing this as a vote of confidence, smaller companies, retail investors, cryptocurrency enthusiasts invested further in bitcoin. This resulted in the latest rally in bitcoin prices, which sent it soaring past the 50,000 dollars to 1 BTC price point.
Means of Payment
Along with a rise in institutional investment into bitcoin, last year saw another significant development for bitcoin. It began to be more widely adopted as a legitimate means of payment by various businesses.
While small to medium-size enterprises, especially from emerging industries, were already starting to accept bitcoin payments, what gave bitcoin the push was adoption and plans of adoption by larger companies.
While companies like Home Depot and Microsoft accepted bitcoin payments for limited purchases and select purchases, one of the significant drivers of bitcoin’s price was Elon Musk’s announcement that Tesla would now be accepting bitcoin payments for its cars.
This announcement on its own was responsible for a 4% increase in bitcoin prices over a single day.
Large corporations are now talking and discussing plans to start accepting bitcoin payments in the near future.
Bitcoin is also rapidly being adopted as a payment option on numerous payment apps and websites. The ability to quickly store and use bitcoin increases the convenience of making transactions with bitcoin.
One of the biggest payment platforms, Paypal, has recently announced plans to accept bitcoin payments and the ability for users to make bitcoin transactions using the platform in the near future.
All of these factors have led to the current price of bitcoin is what it is. Eric Dalius has seen that these factors have not abetted and are still in play. According to him, there is no reason to believe that bitcoin will not be rising further during the rest of the year.
As multiple waves of Covid-19 are hitting nations across the globe, there is an immense sense of uncertainty regarding the economic future again. Even though vaccines have been made, the emergence of numerous mutations and variants makes people doubt the economy’s stability is going into the future months.