The 2021 cryptocurrency rally took the price of Bitcoin and other cryptocurrencies to the moon is a very rare phenomenon. That goes not just for the amount of success that talking like BTC or ETH managed to generate the previous weeks, but also for the overall environment in which the rally is taking place. Now, many are questioning whether or not this is a fluke or the result of over a decade worth of work and effort.
Also, even the harshest critics, meaning those who are operating in the traditional market, or even national regulatory bodies, began to take notice more than ever. That second group is especially causing a lot of concern and worry among those in the cryptomarkets. However, at the same time, many are wondering whether or not the ongoing process of price and value generation in the domain of digital currencies is standing on extremely feeble feet.
Changing of the World
There is absolutely no doubt that bitcoin, as the first cryptocurrency in the world, but also blockchain tech in general, managed to change the very elements of financial reality. With that, they also changed so much more, kickstarting a basic evolution in the way humanity perceives the internet, distribution, and transfer of value, but also the most basic financial institutions like banks and ever state borders. All of these things have been ingrained in the flow of everyday lives for hundreds of years when it comes to the oldest elements here, like national borders.
The most recent among these – the internet – was also a regular element in the lives of billions for more than 20 years. BTC tokens and any other digital currency have been around for a much shorter period. After all, the bitcoin network only began working in 2009 but generated wide-scale attention in a previous couple of years. Yet, today, it seems like the most natural addition to the general financial landscape of the world and all of its individual countries. That in itself is a big pointer towards a level of intrinsic value in the crypto domain.
Over the course of only several weeks, the value of bitcoin detonated upwards. The same happened to its market capitalization, although that took place with a bit fewer media fanfare. That included the market cap of the BTC network hitting the value of one trillion USD for the first time in history. Since the start of the bull run in October 2020, the price went up to a value that is around 350 percent of its starting position. Digital-only ventures like esports and streaming services are no strangers to sudden and incredibly strong growth.
But, this was incredible even for a purely digital venture like bitcoin. At the height of the same run, the price of a BTC token came close to 60,000 USD. Now, the prices experienced somewhat of a pullback and there is even a potential for a bigger drop. But, the surge, even if it is finished by now, brought about another change in the paradigm of cryptocurrencies. Now, huge financial institutions, including those from the top of the governments like the US, have to consider their approach to the same domain.
In the midst of the recent drop in bitcoin price value, the US Federal Reserve Bank also weighed in on the same issue. Its representatives from the Boston branch stated that the bank is surprised by the success of the bitcoin token. However, the statement also underlined that the continuation of the price rise had to be curtailed at some point because of the numerous potential sources of pressure.
These, among other things, include the development of digital currencies issued by other central banks, like the digital yuan in China, as well as other developments that would both clutter the digital currency space and offer alternatives. At the same time, FED did not go into details about their possible decisions about bitcoin trading, nor those of any other digital currencies. For many, the same issue is crucial to either ongoing success or potential choke points for bitcoin. But, there is no doubt that FED is watching the same domain and statements like this only underline the same ongoing process.
The process that the Peoples Bank of China is undertaking is not an anomaly by any means. Instead, it is a part of a broad initiative of many traditional financial entities who want to take on some form of blockchain system evolution into their procedures. The reasons for this are more than abundantly clear. Things like SWIFT are both slow and outdated when it comes to the modern financial environment. Through blockchain, procedures like payment settlement and transactions as a whole can be streamlined to a point of nearly-instant ledger changes.
That would provide the users of these financial entities with numerous benefits, while at the same time, the same organizations would get a more cost-effective system. That will not be something that takes place overnight and drops the price of BTC instantly but will be a source of competition and pressure no matter what happens in the coming years. The same pressure can only diminish the appeal of BTC, which would translate itself to smaller rates of adoption.
Question of Success
The future of the bitcoin network seems bright, despite potential competition and almost certainly incoming regulatory (negative) influences. Yet, that success will come with a diverse value of BTC token, as well as market capitalization. Chances are that the present pullback will take the price of a BTC token below 40,000 USD, or even that there is a drastic reverse in fortune that takes the price over the present highest record. All scenarios are quite possible in the not-so-distant future. However, as many crypto enthusiasts like to say, the fundamentals remain solid.
That includes the ability to offer both a source of high-end investment and low-end everyday use like transactions and storing of value. Regulatory action will bring down the price when it takes place in the US or any other major economy, while digital currencies from central governments will be a competition at some point. But, even with these, the market fundamentals of crypto remain strong and the present rally is by no means a fluke.