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At the beginning of January it was the 15th anniversary of the mining of the first Bitcoin block. This financial innovation sparked a major revolution, Bitcoin changed the way a large part of the world public and also institutions looked at how monetary transactions and investments work. Bitcoin’s current market capitalization is around $850 billion, making it the largest cryptocurrency in the world.
Cryptocurrencies have been coming back into the spotlight lately and after a while they are starting to get more attention from the mainstream media. This happens whenever the value of Bitcoin rises rapidly. The current value comes after two years of decline, the value of the said cryptocurrency has increased by more than half in the last three months to around $46,000, or around a million crowns.
Bitcoin recovered from its low point early last year and has since gained over 160 percent. The peak in November 2021, when the value reached $68,000, is still a long way away, but Bitcoin optimists believe it is only a matter of time to break this record.
It records several expected events. The fourth halving will take place in April. This is a process that reduces the amount of new Bitcoins created as a reward for mining new blocks. The halving occurs approximately every four years.
With each halving, the mining reward is halved, limiting the supply of new Bitcoins and increasing their rarity and value. Of the total planned amount of 21 million Bitcoins, more than 19 million have already been generated. Halving is an important element in maintaining the stability and security of the Bitcoin network. And it also affects its market price because it reduces inflation and increases demand.
Previous halvings have been associated with a rise in the price of Bitcoin. “However, it is just one of many factors affecting it, and certainly not the biggest. Historically, we see the price rise before the reward is halved,” says Presto Ventures partner Roman Nováček.
Trezor’s Bitcoin analyst Josef Tětek adds that the impact is more indirect. “With each halving, the interest of the media and therefore also of retailers increases. “The new supply from miners is already rather negligible; most of the Bitcoins that are traded daily come from existing stocks,” he says.
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Easier access to Bitcoins
According to analysts, another event helped increase the price of Bitcoin. In the United States, they approved the creation of eleven publicly traded ETFs based on the spot price of Bitcoin. “Further growth is expected as a simple, regulated way opens up for US institutions and investors to participate in the price of Bitcoin,” says Tětek.
Roman Valihrach, head of the cryptocurrency exchange Coinmate, sees the approval of the ETF as proof that Bitcoin is being taken seriously and cryptocurrencies are already being viewed as a new asset class. “It is important that the sellers of these ETFs succeed in convincing pension and other fund managers. If these institutions invested even one percent in the ETF, that would mean a huge and, above all, regular capital inflow,” he says Valihrach.
ETFs not only make Bitcoin more accessible to larger institutions, but also make it easier for other investors to invest in cryptocurrencies. Nováček reminds that the introduction and approval of the spot ETF has also contributed to the growth of other commodities in the past, and investors are betting on it. “This was most visible with gold, where demand and price increased significantly in the following years,” says Nováček. According to him, we can expect ETFs for other cryptocurrencies to be created soon, starting with Ethereum.
Payments mainly in developing countries
On the other hand, politicians have fallen for cryptocurrencies, every now and then a bill appears somewhere that can harm them. One of the latest initiatives is a proposal by Democratic US Senator Elizabeth Warren to extend the strict rules of anti-money laundering legislation to all cryptocurrency companies. Tetek assumes that the situation will also worsen in the European Union. “Politicians prefer control and supervision to the prosperity of citizens. However, this will not harm Bitcoin itself, but rather strengthen alternatives that do not require intermediaries,” says Tětek.
In addition to investments, cryptocurrencies are increasingly being used for payments, although this is still a question of the global south, i.e. Africa and Latin America. “In countries where fiat payment systems work satisfactorily, holders prefer the function of a store of value,” says Tětek. In other words: In Western countries, cryptocurrencies serve more as a defense tool against the inflation of government funds. Nevertheless, a number of applications are emerging that are intended to make the acceptance of cryptocurrencies easier. One example is the Georgian CityPay.io, in which the Prague-based capital and investment company Presto Ventures invested last year.
However, stablecoins such as USDT and USDC are usually used for payment instead of Bitcoin. They are pegged to the US dollar and are therefore more or less stable. “Today you can buy almost anything with it. They are often used as an alternative currency in developing countries. It is possible to send them online without having a dollar account in a bank, which the average African does not have. Of course we want Bitcoin to replace this function. However, it is still too volatile,” says Valihrach.
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