Bitcoin price shoots above USD 29,000 mark – USD 30,000 in the new year?
The Bitcoin price (BTC) knows only one direction even during the holidays: north. While stock indices like DAX can take a break from their recently reached all-time high, Bitcoin set a new record high on the morning of 31 December. At its peak, it reached a price of 29,286 US dollars. We were only around 2.5 percent away from the magic 30,000 US dollar mark at the peak. Accordingly, the question arises whether we will wake up in the new year with a 3 in the first place from the bitcoin price.
Normally, it is rather quiet on the stock exchanges at the Crypto Bull turn of the year due to stock market closures and holidays. However, this is not the case for the Bitcoin price. Not only is the crypto market open 365 days a year 24/7, but investors here don’t seem to know any contemplative holidays. The upward trend is motivating more and more investors who have so far not dared to invest in Bitcoin to change their minds.
Even if 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 the reservations among private 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
The factors of scarcity in Bitcoin and oversupply in fiat money are also having a positive effect. Due to the high demand, it is becoming increasingly difficult to acquire Bitcoin on the exchanges. As institutional investors accumulate Bitcoin, they are withdrawn from the market due to the long-term investment horizon, so that the available supply continues to decline.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 real 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 favours 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 gather even more momentum.
It is 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 worried 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 a low correlation to other assets, but because of its scarcity, it is now also seen by professional investors as a risk not to have bitcoin in their portfolio.
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 in or get in first. So if we don’t see the 30,000 US dollar mark broken through in the next few days, the chances are still not good.