Bitcoin in 2021: From All-Time High to Where?
A few months ago, the idea of Bitcoin surpassing its all-time high (ATH) was not particularly outlandish. A week after, it hit $40K. Nothing, it seemed, would be the same again.
A few months ago, the idea of Bitcoin surpassing its all-time high (ATH) was not particularly outlandish. The benchmark had been set three years earlier, and much had happened to strengthen investors’ faith in the asset in the intervening period. Of course, few would have predicted the cryptocurrency to hit $20K then pump past $30K without pausing for breath, and in time for the 12th anniversary of the genesis block no less. A week after, it hit $40K. Nothing, it seemed, would be the same again.
So, where does Bitcoin go from here?
Pumping in a Pandemic
The forward momentum of Bitcoin in the early days of 2021 has inspired headlines around the world, with more institutional players than ever looking to get in on the act. Bitcoin is no longer a shadowy asset that major hedge funds and asset managers shy away from, and with central banks printing money at warp speed to combat the pandemic and its fallout, its status as an inflation safe haven is being actively explored.
According to data collated by Glassnode, the number of cryptocurrency wallets holding over 1,000 bitcoin ($32.6 million) has risen to an all-time high, a sure sign that wealthy institutional investors recognize the asset’s credentials as a store of value.
Although bitcoin’s price has fallen since scaling $42,000, the drop was not exactly precipitous, and consolidation has occurred in the low-to-mid 30s. Moreover, it’s hard to see the long-term outlook as anything but bullish given improvements made to the network’s fundamentals, and the influx of capital from the professional investor class; the cryptocurrency has reached a cultural tipping point.
At this moment in time, Bitcoin’s market capitalization of $601 billion makes it larger than almost every publicly traded bank in the world. Let’s not forget, 2020 was a pandemic year: in this light, Bitcoin’s skyrocketing is all the more impressive.
Institutional Players Join the Party
Asset management giant BlackRock is reportedly contemplating investing in cash-settled Bitcoin futures trading. The world’s largest asset manager has more than $7.8 trillion under its control, including around $235 billion in “alternative investments.” Derivatives could well act as the gateway drug to the crypto market: but what happens when they go after spot?
Speaking of futures, aggregated open interest in the market hit an all-time high on January 14, topping $13 billion for the first time. According to Bybit's Week 3 Recap:
“The surge in open interest suggests that there is a growing speculative interest in Bitcoin’s next direction.”
While it’s difficult to know just how much capital BlackRock might allocate to Bitcoin futures, other big-name investors have been quite forthcoming on the matter. Billionaire hedge fund manager Paul Tudor Jones, who says Bitcoin reminds him of gold in the 1970s (fellow billionaire Stanley Druckenmiller agrees), has allocated 1-2% of his portfolio to the crypto.
Michael Saylor, the outspoken CEO of publicly-listed business intelligence firm MicroStrategy, has amassed 70,470 BTC, purchased for $1.125 billion at an average price of $15,964 per bitcoin. Given that the average price, the firm has more than doubled its investment. In a recent interview, Saylor said:
“I’ve invested in everything, I was an early investor in Apple, Facebook, Amazon, Google, OpenTable, eBay, and PayPal. And I made huge amounts of money. I made 10x, 20x my money in those things and let me tell you, none of them looks as good as this looks to me."
Where Next?
As for long-term price predictions, that of course depends on who you ask. JPMorgan set out a bullish case in a recent note, claiming the cryptocurrency could rally as high as $146,000 while competing with gold as an alternative currency. Bloomberg strategist Mike McGlone is even more optimistic, setting the mark at $170,000.
With $30,000 seen as a key psychological support level, it shall be interesting to see whether the value drifts downward or the bulls rally round for another push towards $40K. Either way, the vast majority of Bitcoiners are in it for the long haul, their iron grip only likely to be tested by $50K. Let’s settle in for the ride.
Image source: Shutterstock
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