Produced by: Carbon Chain Value (ID: ccvalue)
Produced by: Carbon Chain Value (ID: ccvalue)
On November 28, 2017, Bitcoin broke through $10,000.
On December 16, 2020, Bitcoin broke through $20,000.
On January 2, 2021, Bitcoin broke through $30,000.
On January 8, 2021, Bitcoin broke through $40,000.
It took only 17 days for Bitcoin to rise from $20,000 to $30,000, and then it took only 7 days to rise from $30,000 to $40,000 and hit a record high. Whether you are an "industry veteran" who has been in the industry for many years, or a "currency novice" who has just stepped into this field, you must have a question at this time: Why is the price of Bitcoin soaring? Will Bitcoin crash?
In fact, Bitcoin was only invented 12 years ago. It is a new type of electronic payment system built on an Internet-based computing network that is not controlled by any person, company, or institutional entity. The reality is that Bitcoin has a very short transaction history and asset valuation methods are untested, so no one can really be sure what Bitcoin is worth now or in the future.
But this time, digital asset investors and even Wall Street giants have offered price predictions of $50,000, $400,000, or even higher, such as:
MicroStrategy CEO Michael Saylor predicts that with the entry of 100-300 trillion US dollars, the price of Bitcoin may be pushed up to 14 million US dollars. He even believes that Bitcoin will overturn gold and become the world's largest store of value in the future.
BitPay Chief Commercial Officer Sonny Singh predicts that Bitcoin can reach $45,000 in 30 days, but he is cautious about the role of institutional investors in Bitcoin's future, because some giant companies may sell their holdings earlier than expected. cryptocurrencies for profit.
Anthony Scaramucci, founder of hedge fund Skybridge Capital (Skybridge Capital), said that the scarcity of Bitcoin provides people with anti-inflation qualities, because when something is scarce, people want it, and now there is a historic opportunity to catch up with institutions. It is estimated that the price of each bitcoin may reach $100,000 by the end of 2021.
Johnny Lyu, CEO of KuCoin International, mentioned that the current round of Bitcoin’s rise is straightforward and direct. Especially in the week before entering 2021, Bitcoin rose by more than 10,000 US dollars. This is not only the huge buying power brought by the entry of institutions, but also the combined force of the market that has repeatedly pushed Bitcoin to set records many times. Under such market sentiment, Bitcoin is expected to rise further.
Kraken Business Development Director Dan Held believes that Bitcoin's current bull market may be part of a super cycle. The new crown epidemic provides a perfect macro environment for Bitcoin to demonstrate its value. Financial institutions finally understand the value of Bitcoin and are entering the Bitcoin market. The groundwork was laid for a super cycle that could push the price up to $1 million.
So, what are the key reasons for this round of bull market?
Key reason one: The demand from institutional buyers has grown, and many have begun to see Bitcoin as a hedge against inflation. According to the white paper and source code design rules, the total supply of Bitcoin is only 21 million, which is obviously in stark contrast to central banks such as the Federal Reserve that are constantly printing money. Many institutions have already started admission layout, such as:
Major asset managers, including Tudor Investment and Guggenheim Partners, have announced they will “bet” on the CME Bitcoin futures contract;
Analysts at JPMorgan Chase, the largest bank in the United States, recently predicted that Bitcoin could soar to $146,000;
Bloomberg analyzed in the latest cryptocurrency outlook report that $20,000 is already the "new base point" for Bitcoin, and the next resistance level will be $50,000. If historical data is anything to go by, the $50,000 resistance level will be easily breached in the year following the supply reduction;
Morgan Stanley has purchased 792,627 shares of business intelligence software company MicroStrategy in December 2020, accounting for 10.9% of the company's total shares.
The second key reason: the decline of the US dollar in the foreign exchange market. The U.S. dollar index, which measures the U.S. dollar against major world currencies such as the euro and Japanese yen, has fallen 6.8% in 2020, a slide that will continue in 2021. The U.S. dollar is very important to Bitcoin because the price of Bitcoin is mainly denominated in U.S. dollars. The biggest reason for the dollar's decline is that the Federal Reserve has issued more than $3 trillion in currency in the past year, equivalent to three-quarters of the total amount of U.S. dollar issuance in the past 108 years of history. On January 6, the U.S. Capitol was violently attacked by demonstrators. This is likely to be the trigger for the weakening of U.S. leadership on the global stage. Many economists predict that the U.S. government under the control of the Democratic Party will introduce large spending plans and new stimulus bills, so that the government budget deficit will continue to expand in the next few years, and most of the additional costs will be covered by printing new dollars. Achieved.
Key reason three: It is easier for retail investors to buy Bitcoin. You will find that it is becoming easier and easier for retail investors to purchase Bitcoin directly on payment service providers such as PayPal and Square. For example, Paypal’s daily cryptocurrency transaction volume has exceeded 125 million US dollars, and As cryptocurrency trading services continue to expand, transaction volumes are set to grow even further. It is worth mentioning that, according to the analysis of digital asset company ByteTree, the current single bitcoin transaction amount is mainly concentrated in the $600 range, which is similar to the relief amount provided by the US stimulus bill.
In the bull market, the most active is the exchange
Just after the price broke through $40,000, the actual transaction volume of Bitcoin on various cryptocurrency exchanges also soared to twice the previous highest level. According to Messari analysis data, in the first week of 2021, the Bitcoin transaction volume of several major cryptocurrency exchanges in the world exceeded 67 billion U.S. dollars. The previous high transaction volume occurred in mid-2019, when the price of Bitcoin fell below A brief rally into the $10,000 range after $4,000 resulted in a weekly trading volume topping $32 billion. (Carbon chain value note: Messari’s Bitcoin actual transaction volume indicators summarize and adjust the data of several leading cryptocurrency exchanges, such as Bitfinex, Coinbase Pro, Kraken, and Poloniex.)
However, although the market is improving, many people still have doubts, namely: this time the transaction volume of cryptocurrency exchanges hit a record high, how is it different from the last bull market? Will the bull market be followed by a longer bear market like last time? It is worth mentioning that before the official start of the bull market in 2020, some people in the industry had indeed "foreseen" that the market would have a relatively large rise, but what many people did not expect was that the COVID-19 epidemic has caused a huge increase in the market, including cryptocurrencies. The global financial market, including Bitcoin, was hit hard, causing Bitcoin to fall to the $3,000 range on "Black Thursday" on March 12. At that time, many retail investors did choose to sell.
But the situation is different now. As Bitcoin doubled from $20,000 to $40,000 in a very short period of time, the transaction intensity of the exchange has obviously increased significantly. As shown in the figure below, the transaction intensity of Bitcoin on January 8 The number of digits hit 6.77, above the 180-day average:
Judging from the current market environment, it means that more market participants want to "buy" than "sell" - the numbers don't lie:
According to Chainalysis data, on January 9, the inflow of bitcoins on cryptocurrency exchanges reached as high as 127,720, which was higher than the 180-day average;
According to Glassnode data, on January 9, the Bitcoin inflow amount (1-day moving average) of cryptocurrency exchanges hit a record high, reaching $132,812,085.62;
According to Chain.info data, on January 10, the balance on the cryptocurrency exchange chain had exceeded 2 million BTC, and there were a total of 125 large-amount deposits and withdrawals in 24 hours (carbon chain value Note: "large amount" refers to an amount greater than or a transaction equal to 50 BTC);
According to data from cryptocurrency data service provider CoinMarketCap, on January 10, the single-day transaction volume of Bitcoin also exceeded 85 billion U.S. dollars.
It should be noted that due to different data sources, the data provided by different cryptocurrency data service providers are also different. For example, the single-day transaction volume data of Coingecko is 77 billion US dollars. ) from Coingecko's trading data of several major cryptocurrency exchanges:
Why are cryptocurrency exchanges still the most active in a bull market? In fact, despite some inherent risks, the vast majority of individuals, whether institutional or retail, prefer to have their wealth custodial/stored on cryptocurrency exchanges. According to the latest survey data at the end of 2020, 92% of cryptocurrency market participants are willing to choose to "hand over" their bitcoins, stablecoins, etc. to trusted exchanges, rather than choose to control them themselves - at least from the current stage See, exchanges are still the most popular crypto asset custody option, not hardware wallets as some pros think. After cryptocurrency exchanges, the second most popular cryptocurrency custody option is cold wallets, and the last is third-party custodial service providers.
In addition to the record high transaction volume, the network traffic of cryptocurrency exchanges has also reached a peak. According to the network traffic data of cryptocurrency exchanges released by The Block (as shown in the figure below, the data time is January 6, 2021). Go out, the number of visitors to crypto exchanges is approaching 200 million, a record high.
The figure below shows the traffic distribution of several major cryptocurrency exchanges in the market, among which the top ones include: Coinbase, BitMEX, Upbit, Huobi, KuCoin, Bittrex, etc.
Since exchanges are the most active in the bull market, perhaps we can compare the performance of cryptocurrency exchanges through platform coins (as shown in the table below, data source CoinGecko, data time January 10, 2021):
As can be seen from the above table, if the weighted comparison of the 7-day, 14-day and 30-day platform currency gains is made, KuCoin’s KCS performs the best, and of course there are Huobi’s HT and Matcha’s MX.
Most cryptocurrency exchanges have launched their own platform coins after they have a certain strength. Generally speaking, the better the development of the trading platform, the greater the room for the platform currency to rise. Thanks to the recent improvement in exchange traffic and transaction volume, the corresponding income such as cash withdrawals and transaction fees will also increase. As long as the exchange revenue increases, it is natural for the platform currency to rise. As the traffic and transaction volume hit new highs, the performance of the platform currency of the cryptocurrency exchange is getting better and better, because the platform currency is directly generated by the cryptocurrency trading platform, and the value is directly reflected on the platform.
On the whole, as the price of Bitcoin hits new highs repeatedly, as an important part of the encryption ecosystem, exchanges seem to be taking advantage of this shareholder wind to make great strides. So, can this trend continue?
Where Will Bitcoin Go After $40,000?
As we all know, the price of Bitcoin fluctuates greatly. From a historical point of view, a crash is likely to come after a surge. Although Wall Street and many investment giants are very optimistic about Bitcoin, some people in the industry have put forward cautious opinions.
Joe DiPasquale, CEO of cryptocurrency hedge fund BitBull Capital, noted that Bitcoin "has been very volatile," such as January 4, when the price of Bitcoin climbed to a high and suddenly plummeted. Nearly $7,000. Joe DiPasquale believes that the main reason for this may be that someone is using too much leverage, so it is easy to be eliminated.
Gavin Smith (Gavin Smith), CEO of digital asset company Panxora, said that since 2013, almost every year has seen the price of Bitcoin fall by more than 25% from the high point of the year, so if you see Bitcoin rising Don't be surprised to hit $70,000 or $80,000 and then crash 40%.
Johnny, CEO of KuCoin International, also mentioned, "With the recovery of the crypto market, many exchanges including KuCoin have seen a surge in trading volume recently, and KuCoin's cumulative trading volume has recently exceeded 100 billion US dollars. It shows that the investment enthusiasm of the market has been ignited, and it will be a high probability event that Bitcoin will continue to break through the high point. But this process will not be completed overnight, and there will inevitably be several major corrections in the middle, and a correction of more than 20% is also common in the encryption market. There are things, so investors should pay more attention to risks while paying attention to currency prices.
Mike Venuto, co-investment manager of the Amplify Transformational Data Sharing exchange-traded fund that invests in blockchain-related stocks, said that bitcoin prices could rise two to three times from current levels and then fall back to current levels, which could be quite significant. 2/3 of the retracement - Of course, for Bitcoin, it is not impossible for Bitcoin to plummet by more than 50% in a short period of time, because it has happened several times before, such as the short period from mid-December 2017 to early February 2018 In three months, Bitcoin plummeted from about $20,000 to $6,550, and then did not return to the $20,000 level for three years.
In fact, no one knows where Bitcoin will go. After all, most people cannot predict the future. It may be $40,000 today, $100,000 tomorrow, but $5,000 the day after tomorrow. But this time there is one biggest difference from the last "bull market + bear market", that is, the outbreak of the new crown virus in 2020, the U.S. government had to issue trillions of dollars to deal with the impact of the economic depression, but a little economical People with common sense know that the issuance of additional U.S. dollars will lead to long-term inflation and even financial crises. With the failure of the traditional financial system, the scarcity of Bitcoin will undoubtedly attract more attention, and some smart investors have begun to try to diversify their investments to spread risks.
On the other hand, today’s Bitcoin is no longer in the early adoption stage. As more and more large institutions regard Bitcoin as a product to hedge risks in traditional markets, consumers are also beginning to try to trade digital assets in their daily lives. Currency, Bitcoin is becoming a core portfolio part of many institutions and will become a universal payment method.
If people believe in the value of Bitcoin, even a few crashes and bumps in this value road are actually normal. In fact, in the long run, Bitcoin should maintain an upward trend, even if many people think there is a bubble in it, but as Georgetown University finance professor James Angel (James Angel) said, the history of financial markets is the history of bubbles — —So, while facing risks cautiously, don't be afraid.
