Where are crypto going?  Here the causes and circumstances behind its growth

Where are crypto going? Here the causes and circumstances behind its growth

Bitcoin, the reference cryptocurrency, resumed its upward trend after concluding the month of February with a growing value and a valuation that also grew on February 28 to reach US$2 trillion. Faced with this revolution that has been reactivated, the result (among other things) of the stabilization of the world economy after the blow it received when the Coronavirus pandemic, Crypto miners, analysts and even central banks wonder if this pace of growth will be maintained or the momentum that bitcoin is going through will end.

Despite its unpredictable nature, which is affected by multiple factors such as cuts in the interest rates of the world's main central banks (which stimulate consumption), the growing interest of legislators in regulating the digital asset, the offer of new cryptocurrencies and the opening of new markets, Estimates from Arch Finance, a company that manages cryptocurrencies from Chile, suggest that bitcoin could reach its all-time high at US$90,400 by the end of 2024 and those from CoinTelegraph place it at US$180,000.

Experts in the digital asset point out that the rebound in the value of the cryptocurrency is justified by the its purchase by large investors and the approval of ETFs by the United States Securities and Exchange Commission in the last days of January.

Regarding ETFs, these are a group of assets that are listed on the stock exchange. These exchange-traded funds are vehicles that help people invest in a diversified way and at a low cost without the need to purchase the digital asset. Having said that, The emergence of exchange-traded funds has been one of the main growth drivers of cryptocurrencies since, as soon as they were approved, the value of bitcoin began to grow.

Another factor that has driven the bullish return of the cryptocurrency has been the allocation of resources from the main groups of crypto investors. It is particular that despite difficulties such as the collapse of the currency exchange platform, FTX, or the arrest of the co-founder of Three Arrows (cryptocurrency hedge fund), Su Zhu, the digital asset market has shown resilience and seems to continue growing.

Although it still remains a possibility, expectations for the cut in interest rates in the United States have directed the digital asset's path upward. Although inflation has not yet reached its target figure (2%), A boost to American employment and slow but sustained economic growth suggests that crypto investments will continue to grow.

Now, one of the key factors in the cryptocurrency market to take into account this year is the appearance of the 'halving' (the Spanish translation would be splitting in half). The halving is, described by BBVA, as a process in which the number of new bitcoins delivered to miners who have incorporated new valid blocks into the chain is reduced by 50%.

This event is scheduled to occur every four years or every 210,000 mined blocks. This causes the reward that miners receive for validating and adding new blocks to the blockchain to be reduced by half.

The purpose behind this measure focuses on limiting the supply of new bitcoin to contribute to its scarcity and its deflationary model. With a limited supply of cryptocurrencies (and if demand for them remains or increases) the value of the digital asset will grow. As a curious fact, this process emulates properties of gold such as resistance to inflation and the relationship it has with scarcity.

The growth forecasts for the digital asset suggest that its value will continue to grow, at least, until the 'halving' arrives and imposes new conditions. Tim Enneking told Forbes that “the value of the cryptocurrency will be tantalizingly close to US$69,000.” On the other hand, BitFinanzas affirms that as long as the dollar does not depreciate, it is difficult for the value of the asset to exceed US$70,000. Finally, Arch Finance considers a range of crypto growth ranging from US$45,000 to US$70,000 depending on the circumstances already mentioned. In addition, They expect the value of one bitcoin to reach $312,000 by 2029.