Editor's Note: This article comes fromChain reference (ID: lianneican), Author: Internal Reference Jun, reprinted by Odaily with authorization.
Editor's Note: This article comes from
Chain reference (ID: lianneican)
Chain reference (ID: lianneican)
The currency circle is always full of excitement and uncertainty. Just when Bitcoin hit a three-year high of $19,500, Bitcoin suffered a flash crash in less than two days, falling by more than 14% within the day, the biggest drop since August, falling to $16,410. There was another surge in the next two days, and now the price of Bitcoin is back above $18,400.
Bitcoin has largely maintained healthy growth so far this year, despite a slight decline in March. In January, bitcoin was worth $7,200, before falling to around $5,200 in March. In May of this year, Bitcoin began to recover, and the price of Bitcoin began to fluctuate upward. The current price is double that of the first half of this year. Looking at the price before the halving in May of this year, the Bitcoin price has risen by more than 110%. And after entering November, there was a wave of bull market, and Bitcoin rose steadily, and it has reached 18,000 US dollars.
Regarding the sharp rise and fall of Bitcoin this time, Liu Feng, director of the Blockchain Technology and Application Research Center of the Institute of Artificial Intelligence and Change Management, Shanghai University of International Business and Economics, pointed out that this performance is also in line with expectations: on the one hand, the expected landing, the profit is exhausted; On the one hand, Ethereum successfully completed the 0 phase, and other phases started in parallel, which stimulated the market to a certain extent and continued to bring momentum for a steady recovery.
Looking back at the trend of Bitcoin this year, it has been fluctuating upwards. Compared with 2017, when Bitcoin hit a new high, the environment is very different. This year's trend is inseparable from the increasingly prominent value of Bitcoin. With the support of value, 2021 may be the year when Bitcoin explodes in an all-round way.
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The value of Bitcoin mainly comes from the imbalance of supply relationship. That is to say, the market demand for Bitcoin will never and cannot expand its supply.
Secondly, as the legality is gradually recognized by global governments, institutional investors' demand for bitcoin investment increases, and the bitcoin market in 2020 can be described as a bull market for institutions.
Compared with the elastic supply of gold, according to the rules set by Bitcoin creator Satoshi Nakamoto, the constant total of 21 million Bitcoins poses a great threat to the future supply. As up to 90% of the total amount has now been mined, the mining reward, which is the main income of Bitcoin, has dropped from the initial 50BTC to 6.25BTC, which shows that the market has gradually become crowded. Therefore, a limited supply is likely to drive long-term Bitcoin price growth.
According to a report by Chainalysis, judging by the timing and the level of liquidity in the market, the sharp increase in the price of Bitcoin can largely be attributed to the halving of Bitcoin’s reduction. According to the analyst firm's report, the price of Bitcoin is rising, simply because of increased demand and limited supply.
Secondly, as the legality is gradually recognized by global governments, institutional investors' demand for bitcoin investment increases, and the bitcoin market in 2020 can be described as a bull market for institutions.
Due to institutional adoption and the cryptocurrency's limited supply, demand for Bitcoin is a major catalyst, sending the price of Bitcoin soaring, breaking barriers and quickly gaining new support.
As Chainalysis points out, one of the biggest differences between this bull run and the massive rally of 2017 is who is buying Bitcoin. In 2017, the main demand for Bitcoin came from individual or retail investors who wanted to buy Bitcoin with their own capital and personal funds and make a profit from it. Furthermore, investors range from experienced traders to those who know little or nothing about cryptocurrencies.
Now, however, there is a huge shift, with institutional investors looking to buy bitcoin as a hedge against the dollar. With the massive increase in buying Bitcoin from companies like Grayscale and Square, the demand for Bitcoin has also increased significantly. On a positive note for the price of Bitcoin, the number of institutional investors buying the cryptocurrency does not appear to be slowing down.
Encrypted asset trust Grayscale Fund (Grayscale) has significantly increased its Bitcoin trust this year, and there has been a sharp surge in the fourth quarter. At present, Grayscale’s Bitcoin holdings have reached 396,000, accounting for 1.7% of the total network circulation. , and nearly 90% of users in Grayscale are institutional investors. As the buying volume of Grayscale continues to increase, the price of the currency also rises. It can be seen that the improvement of the mainstream market and the rapid inflow of institutional funds have made the current round of Bitcoin's rally more stable and stable.
Due to institutional adoption and the cryptocurrency's limited supply, demand for Bitcoin is a major catalyst, sending the price of Bitcoin soaring, breaking barriers and quickly gaining new support.
Retail investors follow suit and enter the encrypted world, which cannot be ignored. Institutional adoption appears to be the main force behind Bitcoin's new rally. With PayPal and Square providing convenient platforms for buying cryptocurrencies, retail investors have new opportunities to buy bitcoin, and the main force driving the price of bitcoin appears to be coming from investment firms.
Although the retail investor group cannot have an absolute influence on the market, their inherent followability often brings the effect of "icing on the cake" to the trending market. According to data from Pantera Capital investment company, after the price of Bitcoin surpassed a new high of 18,000, the number of retail investors buying through PayPal actually surged.
A key difference between this rally and three years ago is the buying of Bitcoin. While bitcoin may still have connotations of a volatile asset, the coin has found stability and posted healthy growth over the course of the year as the global economy struggles.
In addition, the direction of investment has gradually shifted from traditional investment to digital trends. With the change of the times, the wealth and investment ideas of the older generation have begun to transfer to the younger generation. Therefore, the change in the age group of the people who control the wealth makes the millennial generation an important part of the investment world, and Bitcoin, a new digital Currency has gradually tried to replace the traditional "antique" gold as a new safe-haven choice for young people.
Finally, the global economic environment is also stimulating the price of Bitcoin. Global central banks release water, and at a time when even the value of the U.S. dollar is being questioned, Bitcoin is likely to become a new round of refuge.
Since the outbreak of the new crown epidemic, major central banks around the world have adopted unprecedented quantitative easing to stimulate the economy. Under such circumstances, sensitive capital markets have already begun to worry about the limits of fiat currencies. Take the United States as an example. Since the 2008 economic crisis, the Federal Reserve’s currency has been injected into the market at a steady rate. However, in response to the epidemic, the trillions of dollars that the United States has printed frantically this year have far exceeded tax revenues and brought the government Unprecedented debt pressure.
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Can Bitcoin break out in 2021?
If the cryptocurrency continues to see strong growth and stable support, Bitcoin could have a healthy surge next year and create and maintain record high values. As Bitcoin aficionado Michael Novogratz puts it, the price of Bitcoin in 2021 will be as good, if not better, than in 2020.
Bitcoin hit an all-time high in 2020, surpassing $18,000 for the first time in three years. As this happens, data shows that more and more people are putting money into the cryptocurrency industry.
Cryptocurrency data collation Glassnode has recorded a surge in the number of new bitcoin addresses on the blockchain, representing new investors in the market.
According to Glassnode, the number of bitcoin wallet addresses registered for the first time reached nearly 25,000 addresses per hour. That number and frequency was last seen in January 2018. Looking back at the history of Bitcoin prices, this time it was right after the 2017 bull run that saw Bitcoin hit a new all-time high of $20,000.
As Bitcoin continues to show signs of a possible new bull run, new investors are being drawn to the market. Bitcoin has emerged as a popular safe-haven asset as the world's focus on the global economy has drawn worldwide attention. This optimism, coupled with rising prices, has had a huge impact on Bitcoin's price in 2020. The cryptocurrency, initially valued at $4,000, has surged nearly 400% to $18,000 in November last year.
Additionally, FOMO (or the fear of investors missing out) has been a trend that has boosted cryptocurrency adoption in the past. Investors who may not have held Bitcoin before seeing its price skyrocket, are buying it for profit. While Bitcoin’s mass adoption may still be a long way off, the prospect of a new bull run could be enough to drive a new wave of interest in the industry, including institutional and retail.
Bitcoin investors, including top hedge funds and money managers, are betting that the currency could more than quadruple to $100,000 or more within a year.
Brian Estes, chief investment officer of hedge fund Off the Chain Capital, said that Bitcoin's rise from $18,000 to $100,000 within a year is not a dream. “I’ve seen Bitcoin go up 10x, 20x, 30x in a year. So 5x is not a big deal,” he said.
Based on a model, Estes predicts that bitcoin could rise to between $100,000 and $280,000 by the end of 2021. The model, which uses the stock-to-flow ratio to measure the scarcity of commodities like gold, has a 94 percent correlation with the price of bitcoin, Estes said.
