Is Bitcoin About to Break Into Traditional Financial Models?
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Despite a pronounced dip in value at the beginning of 2021, Bitcoin has continued to enjoy a stellar few weeks of late.
Firstly, the market leading crypto token reached a new high of $48,635 last month, following a huge, $1.5 million (£1.1 million) investment by Elon Musk’s Tesla firm.
This week, Bitcoin’s price increased again to a whopping $48,635 amid news of potential partnerships with financial giants MasterCard. Overall, the token has seen its value soar by more than 364% year-on-year, as it continues to disrupt mainstream financial models and push beyond the verge of the consumer mainstream.
But will Bitcoin really disrupt and arguably break the traditional finance mould, or will it forever exist on the fringes of the fiscal services sector?
Then and Now - Bitcoin During the Last 12 Months
Interestingly, Bitcoin also enjoyed a stellar 2020 despite the coronavirus pandemic, rising by nearly 300% during the year and outperforming the combined gains of gold and the Dow Jones Index by a factor of 10 in the process.
Bitcoin also mirrored the performance and trajectory of gold through October of last year, causing some to speculate that the asset is emerging as a relative safe-haven currency during times of economic tumult.
This is borne out by the fact that Bitcoin is less sensitive to macroeconomic factors than other assets such as stocks and currencies, enabling it to avoid seismic losses as the traditional market depreciates.
As a result, Bitcoin has evolved in the minds of investors to be considered as ‘digital gold’, eschewing its former categorisation as a large speculative asset or simple cash alternative.
Of course, the coronavirus has also created a need for change and increased flexibility in the financial services space, with a number of established fiscal companies considering partnering with Bitcoin (and newer, third-generation blockchains) to create increasingly secure and scalable payment solutions.
Can Bitcoin Sustain This Growth?
Of course, critics will point out that this represents Bitcoin’s third great price rally during its 11-year history, with the previous two having resulted in huge corrections that impacted the whole of the crypto market.
This was particularly evident in 2018, which saw Bitcoin shelve 50% of its value after a bull run that saw it breakout above the $20,000 for the first during the previous 12 months.
However, there’s no doubt that Bitcoin is a more stable and consistent asset now, and one that holds increased value as a secure store of wealth. The technology behind the token has also evolved to offer increased functionality of late, which is why MasterCard has decided to integrate Bitcoin into its payments network through 2021.
This is also increasing the demand for Bitcoin as an investment option, as it’s possible to trade and speculate on the asset through credited brokers and purchase tokens to create a secure store of wealth.
With these points in mind, this latest Bitcoin price surge appears far more sustainable than previous iterations, particularly with the asset finally poised to break through into the consumer mainstream in 2021.