BITCOIN ENDED 2020 AND STARTED 2021 WITH TOTAL STRENGTH!
With the price recording historical highs for consecutive days, impressing skeptics and even those who have been with him for some time, on 01/07/2021 he registered prices above US $ 40,000.00, reaching US $ 746 billion in capitalization overtaking Tesla.
The market capitalization of all cryptocurrencies together exceeded $ 1 trillion.
If you are arriving in this market now and do not understand the reason for this increase, we have brought five reasons that justify this appreciation.
GREAT PLAYERS ARE GATHERING
The sudden influx of institutional investors has given Bitcoin a wave of credibility like never before.
MicroStrategy, Square, PayPal, SkyBridge, GrayScale and now even the Mayor of Miami, considering the possibility of putting 1% of the city's reserve in Bitcoin.
Every week a new institution announces a large investment in Bitcoin and the intention to hold and not just speculate.
Suddenly, traditional market sharks no longer saw Bitcoin as the magic money of the internet or some form of currency used in the darknet, but rather a store of value with a potential not yet known in its magnitude.
This flood of institutions will further reduce the total amount of Bitcoin available, which can cause even greater movements.
THE WEAKNESS OF THE DOLLAR
The crash seen in March 2020 was one of the worst in history and hit all markets, from stock to cryptocurrencies. To solve the economic problems caused by the lockdowns, the Federal Reserve presented the same solution that it has adopted for a long time, the printing of money.
Through the DXY chart (index that measures the dollar against a basket of currencies of the main US trading partners) it is possible to observe the decline that the currency has had in recent months. This reflects the loss of consumer purchasing power.
While fewer and fewer Bitcoins are available, there are more and more dollars in circulation.
So there is a race for valuable assets and Bitcoin fits in here.
Almost 40% of all US dollars ever created were printed in the year 2020.
That's right, last year, the Fed added $ 2.7 trillion, expanding the M1 money supply in an unprecedented way.
A practice that is not new. To give you an idea, 75% of all existing US dollars were printed after the creation of Bitcoin.
BITCOIN MOVES ON CYCLES
Bitcoin tends to exhibit almost exact cyclical behavior of growth, decline, stability and new highs. The changes are extremely volatile, with significant declines in some months, but significant rises in others.
Bitcoin lived its last cycle with a 2017 high, a 2018 low, a stable 2019 and a 2020 high, even with the coronavirus bringing turbulence to the markets.
Halving the issuance of new BTCs by halving is an important indicator, since after the event Bitcoin has historically multiplied its price. The last halving took place in May 2020, so we are within that recovery cycle.
INCREASED GENERAL INTEREST
Retail interest is also increasing. It is not the same as seen in 2017, but there are already signs of increased demand for the subject. On January 2nd, citations regarding Bitcoin on Twitter reached 145 thousand, approaching the 2018 record, with 155 thousand citations.
At Google Trends, searches for the Bitcoin subject have increased dramatically and are approaching the 2017 level. This fact requires more attention, as it demonstrates that retail investors are being attracted by the market and this is a sign that must be taken into consideration , because historically they tend to be late in valuation movements.
EXPECTATIONS AROUND AN ETF
The possibilities for the approval of an American Bitcoin ETF tend to increase. With the departure of Jay Clayton - the former head of the SEC - the approval of a Bitcoin ETF may be possible, as his successor has a more innovative view of the market.
Many believe that an ETF would further increase institutional adoption.
For many, we are still only at the beginning of what could become a much larger adoption, given Bitcoin's small market cap compared to the gold market cap, for example. In such a scenario, the best thing to do is to maintain regular investments and aiming at the long term, which seems to be increasingly promising. The price does not go up forever and corrections can be great opportunities to improve the average price.
You need to be patient and follow the flow of the whales, which were not frightened by the drop of more than 20% last week and took the opportunity to continue filling the shopping cart
while a large part of retail investors did not endure volatility and discarded their positions.
There has been an increase of 200 new whale addresses in the past two weeks (portfolio with more than 1k BTC). The bullish run may resume soon, as the network remains healthy and other indicators in the chain are biased upward, as noted by Rafael Schultze-Kraft, CTO of blockchain analyst firm Glassnode.
Furthermore, liquidity problems on the seller side, which helped the meteoric recovery in the third quarter, may persist, as 78% of all Bitcoin (14.5 million BTC) is now illiquid. "It is a potential bullish picture for Bitcoin in the coming months, as fewer bitcoins are available on the network to be purchased," Glassnode said in a recent report.
Yes, the situations that underpin Bitcoin's price hike exist and are increasingly evident. The fundamentals are getting stronger, so we cannot allow ourselves to be influenced irrationally by short-term declines. Analyzing this market with a long-term perspective has historically shown itself to be the best way to position yourself and always remember, use volatility to your advantage!