Bitcoin has gained more than 180% since the beginning of this year; the bullish run came at the wake of the bear market. The apprehensions about further downside grew deep in January and February. The cryptocurrency markets, however, reversed its momentum and has been on the rise since then. The total market capitalization of cryptocurrencies gained about 150% from YTD.
This is a 15-month high in Bitcoin with maximum gains coming around in the last two months. Various reasons have been cited to explain the rise; rising institutional interest with Bakkt, Fidelity, and CME, increasing momentum with mining and adoption, and a general increase in education about Bitcoin.
According to Mati Greenspan, Senior Market Analyst at eToro mentioned in a mailer,
“A rally of this magnitude doesn’t usually happen based on one catalyst. It’s a general change in sentiment in a market with extremely limited supply.”
Moreover, the traders who were expecting a bear market hadn’t left the market but were waiting on the sidelines for the bullish confirmation. The idea prevalent in the market was buying back cheaper Bitcoins at the bottom. However, Bitcoin has surged through all significant bearish resistance levels at breaking above $11,000.
The transaction volume of Bitcoin has also been on the rise with the number of active addresses surpassing 1 million.
Bitcoin, an Emerging Global Asset
The economic unrest is also adding the value of a way opportunity cost than Gold if one invests in Bitcoin. This is primarily due to small market capitalization and innovation. Hence, if any investors are planning to hedge the investments in an uncorrelated ‘store of value,’ they might consider putting a slight percentage of it in Bitcoin as well.
Furthermore, the ‘hodlers‘ of Bitcoin have always been optimistic about its price due to its limited transparent supply and increasing adoption. Anthony Pompliano, the Co-Founder of Morgan Greek Capital, seemed to resonate the $100,000 Bitcoin prediction. His timeline came with a cautionary warning. Moreover, his personal beliefs have always been strongly inclined towards Bitcoin. He said,
“The price appreciation will be driven by a very simple idea — supply/demand economics remains a valid market price determinant.” He also said, “I believe that Bitcoin will reach a $100,000 price point before December 31, 2021. My current confidence level of this happening is around 70-75%.”
He also explained the market scenario in such a situation. At $100,000 per Bitcoin, the total market capitalization of Bitcoin will be around $2 trillion. This would require investments of large magnitude driven by regulatory adoption. The rise would also see massive volatility; Pomp expects “20-30% drawdowns” during the climb.
Hence, while the ominous bull characteristics are behind us, Whitney Tilson, founder of Empire Financial Research and a former hedge-fund manager is still apprehensive of the gains in Bitcoin [BTC]. Tilson told the media last week,
“Don’t get fooled by the dead-cat bounce this year, Mark my words: A year from now, it will be a lot lower. This is a techno-libertarian pump-and-dump scheme that will end in ruin.”
Do you think that Bitcoin will become the global asset its proponents believe? What will be the driving force for it? Please share your views with us.