Getting Gradually Mature as an Asset , Bitcoin Gains Sharp Rise in Price
As Bitcoin price has broken $8,000 for the first time since July 2018, more and more people turn a curious eye on the primary factor behind the soaring price. One explanation for the rise in the price of Bitcoin is that Bitcoin has been mature as an asset.
Bloomberg cited a report from Indexica, a online smart platform, which developed an index based on natural language processing of text documents in an attempt to explain the recent rising soaring price in Bitcoin.
According to reports, the study reveals three major drive of Bitcoin price rise, including dialogue about Bitcoin, reduced concerns about related fraud, and a shift in people’s attitude towards Bitcoin from its past to its future. More and more financial experts and scholars are studying Bitcoin, and traditional institutions are taking it more seriously. Fidelity Investments will open the transaction of the world’s most popular digital assets – Bitcoin for institutional clients.
Erik Voorhees, CEO of ShapeShift, an encrypted currency trading platform, argues that years of volatility in the bitcoin and token markets are a necessary phenomenon for a new asset. He said that the bubble is an important part of its growth.
In fact, we can’t ignore Bitcoin’s value in blockchain, now the roles Bitcoin plays in blockchain are:
Bitcoin has become the basic pair of transactions for almost all encrypted assets trade through exchanges – since these transactions are usually processed in batches, fewer transactions are computed in chain indicators (on-line transaction volume) than in actual transactions.
It becomes the computing layer of the second tier of extended solutions, such as lightning networks. Although the current lightning network is growing rapidly, it is still insignificant for the entire Bitcoin transaction.
It becomes the computing layer of other blockchain platforms (such as Veriblock’s POP consensus mechanism) and databases, which requires no trust consensus and untouchable modification, but it relies on Bitcoin, the safest blockchain network in the world.
As the Bitcoin network gets mature, we may also see more algorithmic transactions transferring smaller amounts of money. Over time, market-making and trading arbitrage robots will provide cheaper mobility, making the value flow on the Bitcoin network smoother. This is also an positive indicator, because the increase in liquidity can attract more institutional investors, who can invest or sell more bitcoins each time without leaving too much impact on prices, thus causing no decline in trading orders.
Since the ICO explosion began to slow down in 2017, the market value of Bitcoin has maintained a dominant position of 30% to 60% of the total market value of encrypted currency. Part of the reason is that it is the safest blockchain, having the most advanced reputation, and network effect makes sense.
The yellow area indicates that the market value of BTC of the total volume of cryptocurrency
In another word, if a large number of other encrypted assets perform well, they will have a tremendous pull on the price of Bitcoin because investors will rush to buy these assets and boost the volume of the two kind of transactions (such as BTC/XRP).
BTC is the most widely used cryptocurrency in almost all exchanges, which means that a large number of encrypted assets are exchanged through Bitcoin. As a result, any encrypted asset can’t rival the volume and liquidity of Bitcoin – for liquidity will attract investors, you know.