1. Scarcity

2. Adoption

Another key factor driving the increasing price of Bitcoin is the rate at which new consumers are buying and exploring cryptocurrency. Additionally, adoption rates are now boosted by the appetite of institutional investors, which then gives confidence to the retail market.

In general, Bitcoin adoption rates are faster than those of the internet. Assuming it continues at current rates, the compounding acceleration of new adoption will keep pushing the value of Bitcoin higher and higher.

Bitcoin adoption has been increasing at an annual rate of 113%, according to data from the digital asset management firm CoinShares. (Meanwhile, people adopted the internet at a slower pace of 63%.) If people warmed to Bitcoin at a comparable rate to that of the internet’s early days (or faster), there is a case for 1 billion users by 2024 and 4 billion users by 2030.

Coinbase says it has now over 73 million worldwide users, while fellow exchange Gemini recently released its “State of U.S. Crypto Report,” which states that 21.2 million Americans own cryptocurrency of some kind (which is only 7%).

Throughout the year of 2021, companies and institutions continued to increase the adoption of bitcoin. In February, Elon Musk with Tesla exchanged 7.7% of cash holdings to add 1.5 Billion USD worth of Bitcoin to its balance sheet. Many other firms also made the headlines with bitcoin accumulation activity, but none more than MicroStrategy, which purchased another $94.2 million worth of bitcoin in December.

According to the Bitcoin Treasuries List, 59 Companies and a handful of countries now hold 1.49 Million BTC. As institutional investors continue to acquire Bitcoins at exponential rates, It is only a matter of time before we witness a Bitcoin supply squeeze.

3. Regulation

Although cryptocurrencies are rapidly maturing as we enter the mass adoption cycle, the actions of governments will continue to impact the crypto price. When China banned Bitcoin mining in September 2021, for instance, investors saw the price of Bitcoin drop, though it quickly bounced back to its usual volatility.

America is also watching the crypto industry. President Joe Biden recently signed an infrastructure bill requiring all crypto exchanges to notify the IRS of their transactions. Similarly, Treasury Secretary Janet Yellen recently said stablecoins should be subject to federal oversight. Although this activity may only affect taxpayers in the United States, many other nations will most likely follow suit.

What we do know is that crypto holders that want to stay on the right side of the law should keep two things in mind: 

1. 1. Keep records: Keep track of your costs and transactions as accurately as possible. Make sure to reconcile with what the exchanges will be reporting to any regulatory bodies. 
   2. A Crypto Accountant: Using a crypto-knowledgeable tax professional could be even more helpful in accurately reporting your crypto investments. 

4. Mining Cycles

Finally, the fourth significant influence on Bitcoin’s price is a cycle known as ‘The Bitcoin halving’. Bitcoin’s next halving will likely occur between February 2024 and June 2024. This programmed event is built into the bitcoin algorithm and results in the reward payment for mining Bitcoin getting reduced by half.

Halving the reward influences the rate at which new coins enter circulation, impacting the value of existing Bitcoin holdings. Historically, halvings have correlated with boom and bust cycles.

Companies continue to expand Bitcoin mining efforts (see graph below). Recently Marathon Digital Holdings, a Nasdaq-listed bitcoin mining company based in Las Vegas, has ordered new machines worth $879.06 million, to be delivered through 2022. Marathon is one of the largest public bitcoin mining companies in the world and is estimated to produce a total of over 3,000 bitcoins in 2021.

With this much interest in strengthening Bitcoin infrastructure, coupled with a diminishing supply, we can be sure that the cost of each coin will also increase.