By Freddie Fine
Throughout 2020, and continuing into 2021, cryptocurrencies have skyrocketed, such as bitcoin, litecoin, ethereum, and most recently, dogecoin. However, what has caused these cryptocurrencies to amass such wealth, and why do people buy it?
The picture above is a graph of the value of one Bitcoin over the last year. In the last 4 months, Bitcoin has soared, almost tripling in price to reach its current value of nearly $40,000. Lots of people have been putting their money into bitcoin, an alternative currency from the dollar, due to inflation and stimulus spending. The stimulus packages have added $2.4 trillion to the economy, causing people to be afraid of a potential crash in the worth of the dollar.
Another cause of the increase of bitcoin is the ability to pay with it. Late in 2020, PayPal and other online payment services enabled cryptocurrencies as an acceptable form of payment. This has enabled people to have a practical use of bitcoin, other than as a place to store money.
As the bitcoin and cryptocurrency craze builds, more and more people are investing into it, causing it to further increase. It has no longer just become a safe, anonymous place to store money, but an investment opportunity. As demand for these cryptocurrencies gets higher, price gets higher.
However, out of all these reasons, the most obscure reason for a cryptocurrency to amass such wealth is the power of Elon Musk, specifically on Twitter. He has pushed Dogecoin to new heights since his Tweets on February 4th, such as the one below.
Since his Tweets, Dogecoin has over doubled its value, from $.04 to over $.08.
However, despite recent success, cryptocurrencies have always been volatile. When Bitcoin peaked at nearly $38,000 on January 29th, it immediately fell down to $32,000. Since then, it has broken the $40,000 barrier, however, in a one month period it has fluctuated between $30,000 and $40,000 a lot.
The rise of cryptocurrencies is just one of many strange things to happen in the market since the beginning of the pandemic, and while it may not be the last, it seems as though it is here to stay.