Tuesday, July 27, 2021

Five Key Factors That Drive Investors To Cryptocurrencies

Bitcoin and other cryptocurrencies saw a massive selloff this week following China’s crackdown on the industry.

Around $ 400 billion in value has been wiped from the total digital currency market since Friday, when a major Bitcoin mining hub ordered miners to shut down.

It followed reports that the Chinese central bank had met with banks and given instructions to freeze all payment channels supporting cryptocurrency trading.

Bitcoin, the world’s largest cryptocurrency, experienced a wild trading session on Tuesday where it briefly fell below $ 30,000, seen as a key support level – before returning to positive territory.

We take a look at five key factors that drive investors to cryptocurrencies.

 

  1. Inflation

    First of all, inflation. Inflation is a legitimate and growing concern as economies reopen and pent-up demand is triggered by households, businesses and entire industries, but faces supply shortages.

    Bitcoin is widely regarded as a shield against inflation, mainly due to its limited supply, which is not influenced by its price.

  2. Institutional support

    Large institutional investors are investing more and more, bringing with them capital, expertise and reputation.

     

  3. Regulation

    Global financial supervisors are increasingly seeking to establish a regulatory framework. Why? Because they take crypto more and more seriously as a financial asset and medium of exchange.

    Regulation, which I believe inevitable, would give more protection and therefore more confidence, to both retail and institutional investors.

  4. Demographics

    Millennials enjoying the largest generational wealth transfer ever, estimated at more than $ 60 trillion from baby boomers to millennials over the next three decades, have grown up on technology. They are digital natives. Cryptocurrencies are, by their very nature, technology-driven.

    Moreover, they are decentralized and therefore are not controlled by any financial institution, which is widely regarded as outdated and unreliable by millennials.

  5. Future of the money

    Savvy investors appreciate the inherent value of borderless digital global currencies for business purposes in our increasingly digital economies in which businesses operate in more than one jurisdiction.

    As such, cryptocurrencies are considered the future of money.

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