The Bitcoin price (BTC) knows only one direction even during the holidays: north.
While stock indices like DAX can pause from their recently reached all-time high, Bitcoin has set a new record high on the morning of December 31. Thus, a price of 29,286 US dollars was reached at the peak. We were only around 2.5 percent away from the magic 30,000 US dollar mark at the peak. Accordingly, the question is whether we will wake up in the new year with a 3 in the first place from the bitcoin price.
Normally, it gets rather quiet on the stock markets at the turn of the year due to stock market closures and holidays. However, this does not apply to the bitcoin price. Not only is the crypto market open 365 days 24/7, but investors here don’t seem to know any contemplative holidays. The upward trend is motivating more and more investors who have been reluctant to invest in Bitcoin to change their minds.
Even though the upward trend is primarily led by the new crypto investor group, institutional investors, they in turn are also generating confidence among other investor groups. So the fact that insurance companies and Nasdaq groups are now also investing in Bitcoin reduces reservations among retail investors. Now that so-called smart money is entering the market, previously critical investors are also gaining confidence in the crypto asset class.
Bitcoin price knows several drivers
Also having a positive effect are the factors of scarcity in Bitcoin and oversupply in fiat money. Due to the high demand, it is becoming increasingly difficult to acquire Bitcoin on the exchanges. As a result of institutional investors accumulating Bitcoin, they are withdrawn from the market due to the long-term investment horizon, so that the available supply continues to decline. This creates a veritable liquidity crisis, which drives up prices.
At the same time, the money supply continues to increase, which has not yet found its way into the real economy. Instead, it remains in the financial sector and is hoarded there. This not only favors asset prices – see DAX all-time high – but also increases the probability of inflation. More and more market participants expect higher inflation rates as the velocity of money in circulation picks up in the summer. With the end of the lockdown, the filled money hoards threaten to open up for the real economy. The loss of purchasing power would thus pick up even more momentum.
It’s a risk not to have bitcoin
Bitcoin’s scarcity is high on the list of more and more investors as an anti-inflationary shield. In particular, those concerned about monetary stability are increasingly turning to Bitcoin alongside gold. Since government bonds, especially European ones, no longer yield positive interest, the investment emergency is pushing more and more money into real assets. Not only on its tendency to have low correlation to other assets, but because of its scarcity, it is now seen as a risk not to have bitcoin in one’s portfolio, even by professional investors.
Certainly, the market has already run very hot and a consolidation would be perfectly justified at any time. Nevertheless, the above narrative hovers over the bitcoin price in 2021. To wit: Even if the Bitcoin price drops by 20 or 30 percent, there will be enough investors such as hedge funds, insurers, family offices and, last but not least, private investors ready to buy more or to get in first. So if we don’t already see the breaking of the 30,000 US dollar mark in the next few days, the chances are still not bad that we will sustainably break through this mark in the course of 2021.
What trends to expect in 2021 on Bitcoin and other phenomena in the crypto sector will be revealed in the video commentary.
We at BTC-ECHO say goodbye for this year and are looking forward to the certainly exciting crypto year 2021 together with you.