One analyst sees “the great fear of 2021: inflation” behind the rises. Another warns against exaggerated expectations. Events are coming thick and fast for Bitcoin. Only towards the end of the previous year did the cryptocurrency crack the old record high at just under 20,000 U.S. dollars, at the end of the week, the mark of 40,000 dollars was now already due.
The credo behind this rapid rise: more and more institutional investors are discovering Bitcoin as a protection against inflation; it is considered digital gold. While conventional currencies such as the dollar or the euro can basically be increased at will by central banks, this is not the case with gold and Bitcoin. Many people are using a bitcoin trading software, this way it is much easier for newbies.
“Demand for alternative investments is on the rise,” says Simon Peters, an analyst at investment services provider eToro – and finds clear words to explain: “Institutional investors worldwide view Bitcoin as both a growing asset and an insurance policy against the great fear of 2021: inflation.”
Inflated money supply
Since the Corona crisis, monetary authorities have indeed been turning the big wheel to somewhat cushion its economic impact. For instance, from January to November 2020, the Fed inflated the stock of money (measured by M2 money supply) from $15.4 trillion to $19.1 trillion – an increase of nearly a quarter in just a few months. In the same period, the number of Bitcoins has increased by only 1.9 percent to 18.53 million units, because new units must first be generated by computing power – and this is also only possible up to the maximum quantity of 21 million Bitcoins.
The momentum behind bitcoin’s rise is unlikely to abate, according to eToro analyst Peters, especially as the “munificence of central banks and governments” undermines the value of traditional investments such as bonds. “Cryptocurrencies are going mainstream,” Peters posits. “With this positive momentum, Bitcoin is well on track to reach my price target of $70,000 to $90,000 by Christmas 2021.” However, volatility, i.e. price setbacks, is to be expected until then, he adds.
Raiffeisen Research also warns of such in a recent bitcoin analysis. “Various indicators that measure the mood on the markets suggest that the crypto market is currently very overheated – and that is actually not a good sign,” says analyst Manuel Schleifer. Investors should therefore not blindly chase the market, i.e. not buy at any price.
Schleifer advises caution when it comes to price targets of more than 100,000 dollars – even a million dollars is being orated about in some places: According to him, the underlying models are based on very optimistic and highly simplified assumptions. Nevertheless, he believes that “as a small addition to a broadly diversified portfolio with different asset classes, Bitcoin and Co. have their right to exist in the current environment.
Declining price momentum
Bitcoin’s rise has been rapid in recent months. In the long term, however, the momentum behind the price gains is actually decreasing (see chart), as eToro analyst Peters also notes: In the bull market up to 2013, as strong upward phases are called, the price had risen 500-fold from low to high, in the bull market up to 2017 by a hundred-fold. Now he expects a twenty-fold increase, resulting in his previously mentioned price target.
Overall, the market for all cryptocurrencies has recently surpassed the one trillion dollar mark. The number two in the market, Etherium, has also regained its footing and is approaching the record high of $1329 set in January 2018. Still, with $626 billion in total value, or just over 70 percent share, Bitcoin remains the undisputed top dog in the cryptocurrency market.
JPMorgan forecasts bitcoin price of $146,000
Nikolaos Panigirtzoglou, Managing Director at banking giant JPMorgan, forecasts a Bitcoin price of around $146,000. The figure, which seems somewhat arbitrary, is made up of a simple calculation and refers to the potential to outstrip gold as a popular asset class among small investors in the long term. The calculation: If the spending of private investors in Bitcoin equals the investments in gold, the Bitcoin market capitalization of about 590 billion US dollars (current level already over 750 billion US dollars) would increase by 4.6 times. Breaking this value down to the Bitcoin Supply results in an exchange rate of 146,000 US dollars. The value is by no means set in stone and rather underscores Bitcoin’s still immense growth potential. However, Panigirtzoglou, who has predicted a shift in capital inflows from gold to BTC in the past, sets the time frame wide, emphasizing that low volatility is a prerequisite for wealth transfer. So it may be several years before Bitcoin catches up with gold.
Increase of BTC usage in esports and online casinos
Another trend is remarkable, a lot of BTC are now beeing used by betting on esports or in online casinos. BTC has a lot of benefits in comparison to FIAT, when it comes to gambling. You can read more about this topic at many international magazines.
SkyBridge launches bitcoin fund
According to a press release, crypto funds are getting another boost. SkyBridge Capital, one of the world’s leading alternative investment firms, shows up responsible for this. In doing so, the company is launching its SkyBridge Bitcoin Fund LP, which offers wealthy investors an institutional investment vehicle for exposure to Bitcoin. In doing so, the blog had already reported before the holidays on a corresponding filing by SkyBridge with the U.S. Securities and Exchange Commission (SEC). To launch the SkyBridge Bitcoin Fund LP, SkyBridge and its partners invested a total of $25.3 million. As a result, SkyBridge is now one of the most established financial institutions to launch a Bitcoin product, offering a safe and easy way to buy and sell Bitcoin. Fidelity has been secured as the custodian bank. Ernst & Young will serve as the audit firm.
Dubious crypto project
A German influencer is the new advertising face of G999, a crypto project by Josip Heit. Heit was the CEO of Karatbars Group, which gained notoriety when BaFin banned its cryptocurrency, KaratGoldCoin (KBC), and demanded repayments to investors. On its homepage, G999 makes no secret of its ambitions. Nothing less than “a peer-to-peer electronic cash system that aims to become a solid global money with fast payments, micro-fees, a new generation of communication and high transaction capacity” is what the G999 project wants to become. The most recent press release, dated Jan. 6, is no less thick: “a uniquely electronic system, card reader and app, for telecommunications and messenger in one, inspired by the deflationary token economic model, enabling fast payments, micro-fees and a variety of other options,” it says. A thoroughly questionable endeavor.
Trump bans eight Chinese payment apps
On January 05, outgoing U.S. President Donald Trump signed a decree banning eight Chinese payment apps in the United States. Among them are big names like Alipay and WeChat Pay. In addition, CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate, and WPS Office are also affected. It is one of the latest blows between the Trump administration and China. The decree will take effect 45 days after it is issued. Consumers will no longer be allowed to transact through the payment apps. Transactions that would circumvent the ban are also prohibited. As justification, the still-president cites data protection reasons that concern “national security.” He fears that the government in Beijing would misuse personal data of Americans for espionage purposes. Information gleaned from the data could allow China to create dossiers on federal officials, for example.