2017 could go down in history as the year of cryptocurrencies. Since the beginning of they year, the total value of cryptocurrencies could rise 876% until mid of October as measured by market capitalisation. The stock market took more than 20 years to generate the same profits as the digital currencies needed only a few month.

Although Bitcoin was not as strong as some other cryptocurrencies, it is still the leading currency. The world’s most popular digital currency has risen by nearly 500% over the past 12 months and has reached a market capitalisation of 97 billion US dollars. In 2015, Bitcoin was still 3 billion US dollars. Due to current developement it seems plausible that Bitcoin will soon reach a market capitalisation of $100 billion.

Seven reasons for the massive rally of Bitcoin

You may be wondering why cryptocurrencies like Bitcoin are able to rise so much. The drivers for growth are based on 7 factors.

1. The potential of the blockchain technology

The most logical and tangible reason is the potential of the blockchain technology, which Bitcoin is based on. The blockchain is nothing more than a digital and decentralized storage location in which transactions are processed centrally without middle mans.

The blockchain is usually an open source network. This means, that it is almost impossible to modify data without someone finding it out. This security aspect makes the future of the blockchain as a payment platform more interesting.

2. Bitcoin blockchain upgrade for larger companies

Bitcoin investors should look forward to a software upgrade that split up Bitcoin into 2 separate currencies two month ago: Bitcoin and Bitcoin Cash. This software upgrade resulted in some data was removed from Bitcoin’s blockchain to increase capacity and to reduce transaction costs. At the same time processing times wwere shortened. This upgrade should motivate business users to test blockchin in pilot projects.

3. Falling US Dollar

The US dollar exchange rate dropped against the Euro this year, which is generally good news for American exports. This is not so great for investors, which have cash. When the dollar drops, investors usually invested in gold, because it is a finite ressource and a solid value store. Bitcoin is also seen as a finite ressource, because the number of coins is limited to 21 million. Bitcoin also benefits from the fact that it is respected as a safe investment.

4. Institutional investors begin to show interest

There is also a certain interest from institutional investment companies such as Fidelity and Goldman Sachs. Abigail Johnson, CEO of Fidelity, recently announced that its company has successfully mined Bitcoin and Ethereum. Fidelity gives its customers access to crypto-shares through their website.