Since it was launched in 2009, Bitcoin has become hugely popular. The peer-to-peer digital currency is now seen as a store of value and a long term investment, with early investors seeing incredible returns of more than 10,000%. Although it was originally proposed as a system for transferring money without the need for a middleman, its value as an investment has attracted the most attention.
As Bitcoin has grown, many other cryptocurrencies have been launched, though Bitcoin remains the original and most valuable. Over time, the market has risen and fallen, but can the price keep increasing forever?
Let’s take a look at some of the factors which may affect BTC price in the future.
Competition from Other Cryptocurrencies
Bitcoin’s success has seen many other companies, coders, and organizations launching their own digital currencies. At the start of 2023, there were an estimated 20,000 different cryptocurrencies on the market. Although many of these fade into obscurity, some become very popular. Ethereum is the second largest cryptocurrency in terms of market cap, and it functions very differently from Bitcoin, offering other advantages.
While Bitcoin is a popular investment, its use as a money transfer system has come into question. The current network is only capable of processing seven transactions per second. On the other hand, money systems such as Visa process an average of 1,700 per second. As a result, cryptocurrencies that provide better scaling may become more valuable than Bitcoin in the long run.
Although it’s unlikely for another cryptocurrency to become more valuable than Bitcoin in the near future, the increased competition from other digital assets means that investor money is often going into altcoins. This can mean that the price won’t rise as quickly as it has in previous years when there were fewer competitors.
Market Events
Like the stock market, the cryptocurrency market is often affected by market events that impact the global economy. Crashes and price increases can both happen as a result of world events, as they have an influence on investor confidence and decision making. A good example of this was during the global COVID-19 pandemic. The initial response in 2020 saw huge market crashes of stocks and cryptocurrency. Bitcoin, already in the grips of a bear market, fell by around 57%.
Bitcoin isn’t always directly correlated to the stock market, but the state of the global economy will always have an impact on the price. Investors will be far less likely to buy if they’re worried about the future, and are more likely to buy when they have disposable income to spare.
In the future, any number of market events could cause Bitcoin’s price to rise or fall. That’s why it’s important for investors to exercise caution. There’s no way to know how the markets could move, so it’s advised to only ever invest money you can afford to lose.
Government Regulations
While Bitcoin is decentralized and not issued or controlled by governments, regulations can still have a major impact on price. The US and China are the world’s two largest economies, and when news of either government regulating cryptocurrency spreads, it always affects the market. China banned Bitcoin mining and made the use of cryptocurrency illegal in 2021, resulting in a major fall in prices.
Regulations can also have a positive impact on the price of Bitcoin and the cryptocurrency market. When the SEC approved a Bitcoin futures exchange-traded fund (ETF), it resulted in the price climbing once more. More people now have easier access to Bitcoin investing, and regulations can help make the markets safer and more attractive, increasing mainstream appeal.