It’s been a great month for the crypto industry. After a 3 year long bear market, Bitcoin finally surpassed it’s 2017 high of just under $20,000 USD.
As I write this blog post, it’s currently hovering around $23,000. For those that were accumulating and hodling diligently during the last three years, you should be getting handsomely rewarded right now.
Also not to gloat, but in 2018 I wrote this blog post called Price Prediction: $20,000 by 2020, which was based on nothing more than following basic patterns and price history. Bitcoin follows a cycle (usually pumps hard a year after the halving) and like clockwork here we are again today and a new all time high.
But as with any market that moves as much as Bitcoin, it’s important for us to understand all the catalysts for this move.
Demand outweighs supply
There is not enough Bitcoin being mined to satisfy demand. In November, Grayscale purchased 2x more BTC than was mined during the month for its Grayscale Bitcoin Trust – a service that institutions use for investing in BTC.
WHAT IS BITCOIN? A FREE BEGINNER'S GUIDE FOR KIWIS.
ENTER YOUR EMAIL BELOW AND I'LL SEND IT STRAIGHT TO YOUR INBOX.
There are many reasons for this – one is the continuing stimulus from the US Fed, and the global uncertainty about the economy (BTC is usually seen as a safe haven, as country’s economy’s can collapse, but BTC is not tied to any one country). Low interest rates are also a factor, an all inflation hedge assets, such as gold and Bitcoin have been seeing large demand increases this year.
We had a halving in May 2020 which is significant, because it means there is much less Bitcoin being put into circulation than there has been over the last 5 years.
While previously each block rewarded miners with 12.5 BTC, now only 6.25 BTC are created. Demand has increased greatly while supply has been cut in half. Obviously this is a big catalyst for price to rise sharply.
Interest from billionaires and high net worth investors
The institutional interest in Bitcoin continues to grow and now some of the world’s richest people are starting see value in Bitcoin as an inflation hedge and a safe haven investment.
Paul Tudor Jones is one of the greatest investors of this generation and has said that he has 1-2% of his portfolio now in Bitcoin. He also believes it will grow substantially in the next 20 years, and thinks it is a great investment hedge. In an interview on CNBC, he said he expects it’s very possible it will be the best performing asset in his portfolio.
Stan Druckenmiller, another US billionaire has said he believes Bitcoin could be a very valuable asset class to millenials and it’s brand and stability grows every day. Remember most people think of Bitcoin as something “new”, but Bitcoin has now been around for 13 years. It’s an established asset and becoming more attractive to different demographics each day. Druckenmiller also was quoted as saying, “If the gold bet works, then the Bitcoin bet will probably work even better, because it’s thinner, more illiquid and has more beta to it”. This is big turnaround from 2018 when he was recorded as saying he had no interest in owning Bitcoin. He did not disclose his holdings, but simply said he now owns Bitcoin, though much less than his holding in gold.
Bill Miller, owner of $3 billion hedge fund Miller Value Partners, also came out and said he “strongly recommends Bitcoin”, as it’s been the single best asset class in the last year, last five years and last ten years.
Cathie Wood, a Wall Street legend and owner of ARK Investments, famous for her early bet on Tesla, also came out and said she believes Bitcoin could realistically hit $500,000 per coin. This was due to the Fed keeping interest rates at almost-zero, and the growing interest from institutions.
Finally Eric Peters, CEO of One River Asset Management, and billionare Alan Howard said they were opening a $600 million position in Bitcoin and cryptocurrencies, and would like to bring that to $1 billion as early as 2021. Their rationale was there is going to be a “generational allocation to this new asset class” and that “the flows have only just begun”.
Interest from companies and institutions
US listed company Square announced some months ago that they were a forward looking company, we bullish on Bitcoin, and that it made sense for them to move $50 million of their treasury into BTC.
Not long after, UK listed fintech company Mode said they were moving 10% of its cash reserves into Bitcoin.
Just a couple of months later, 169 year old insurance company Mass Mutual announced it would also be moving $100 million of its equity into BTC.
US payments giant Paypal then announced it was finally introducing Bitcoin and cryptocurrency services on its platform, allowing users to invest in and make purchases with crypto.
Where to from here?
As we know, once Bitcoin tops it’s all time high, all bets are off. Nobody can guess where it goes or what happens, but we have never seen this amount of institutional support before or interest from the billionaire crowd.
The good news is, if you’re a hodler, you don’t need to worry. It can be tempting to want to buy bottoms and sell tops, but as we’ve seen over the past 13 years, Bitcoin has always trended upwards, and hodling has been a flawless strategy until now. Don’t panic, don’t get excited, watch this market with a smile and enjoy the ride.
Note: I did predict $100,000 by the end of 2021. Let’s see if that prediction comes true too 😉
Note: Investing in Bitcoin is risky. All investments carry risk. This is not financial advice and I am not your financial advisor. Always do your own research and consult your own professionals before investing.