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Bitcoin’s Latest Boom

Bitcoin Supply and Demand Trends

The price of Bitcoin broke $50,000 yesterday for the first time in history. The cryptocurrency was up 5% for the day and more than 74% for the year. After these morning gains, Bitcoin prices receded somewhat.

New Bitcoins are created by powerful computers solving complex math puzzles in a process called mining. This process means that it takes energy to create new Bitcoins so the supply will always be limited. Between August and December of 2020, about 150,000 Bitcoins were mined and about 359,000 Bitcoins were purchased. These supply and demand trends have continued in 2021, causing the price of the cryptocurrency to surge.

Comparing Current Conditions to 2017

Bitcoin is notoriously volatile and it has seen large spikes and drops before. Skeptics point to the 2017 Bitcoin bubble and say the current bull run likely will not last. In late 2017, Bitcoin prices surged to $20,000 but the currency lost over 80% of its value the next year.

But other investors believe Bitcoin is in a different position than it was three years ago because demand is being driven by institutional investors rather than speculative retail investors.

Companies and Governments Look to Integrate Bitcoin into Operations

A growing number of companies have integrated Bitcoin into their operations recently. Earlier this month, Bank of New York Mellon (BK) announced it would handle Bitcoin like any other asset. Mastercard (MA) is making plans to incorporate Bitcoin into its payments network. Tesla (TSLA) has purchased $1.5 billion worth of the cryptocurrency and says it will soon begin accepting payments in Bitcoin.

MicroStrategy (MSTR), a business analytics company, announced yesterday it will sell convertible debt to acquire more Bitcoin. Last week, the mayor of Miami said the city is looking into using Bitcoin to pay part of city employees’ salaries and might also allow residents to pay a portion of their taxes with the cryptocurrency. Analysts have differing opinions about the future of Bitcoin, but at the moment it is gaining significant attention from companies, governments, and investors.

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