Bitcoin Mania- Bubble or Boom?

February 26, 2021 09:11 AM AEDT | By Aayush

The global rally in the equity markets

There’s no denying that Bitcoin’s rally has also been supported by one of the strongest rallies in the global markets. For instance, the US markets (among others) are trading at an all-time high level, and most of the markets have pared all the losses of the March 2020 meltdown.

The rising markets have created an investment friendly environment, which took a severe hit during the initial stages of the pandemic.

Low-interest rate environment

The low-interest rate environment is also favouring Bitcoin as an alternative investment. The global interest rates are near historic lows to keep the borrowing costs low to support the economic recovery amid the coronavirus pandemic.

As a response, investors are reassessing their investment opportunities in this low-yield environment.

Developments in the digital payment landscape

The most crucial factor behind this ongoing rally is the fundamental developments taking place and a rapid pace. For instance, PayPal Holdings Inc (NASDAQ:PYPL) has started accepting Bitcoin as a payment option for its 26 million merchants. Mastercard (NYSE:MA) has recently announced its plans to accept Bitcoin onto its network. Tesla Inc (NASDAQ:TSLA) has also announced that it would start accepting Bitcoin against its products.

These are just a few of the numerous developments that are taking place in the crypto space, helping to generate unprecedented demand for Bitcoin. However, to dominate the payment landscape, Bitcoin needs to become more stable with its price, which might take a few years.

Looking from a pure price perspective, it is undoubtedly trading in an overbought zone. The sharp surge in the price has also been attributed to some high-profile tweets and endorsements, which may soon revert back to reality. In any case, the price correction in Bitcoin might be on the cards, but it may not materialize into a catastrophe that we saw in 2018.

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