Level / counterpoint: if Bitcoin approaches all-time highs, is it actually any completely different now?
By Yasin Ebrahim and Peter Nurse
Investing.com – Bitcoin is back at the height of history. The popular crypto is approaching the $ 20,000 milestone for the first time since 2017. Unlike yesterday’s rally, which was largely fueled by speculation, FOMO and irrational exuberance, this recent surge bears the hallmarks of real staying power.
The next step is its acceptance in practice as a currency for transactions, not just a curiosity. And that still seems a long way off.
Investing.com’s Yasin Ebrahim argues for Bitcoin, while Peter Nurse gives us reason to be skeptical. This is .
The cop case
The underlying demand on this rally does not appear to be volatile, largely due to retail investors looking to make money quickly. This time around, Bitcoin has finally caught Wall Street’s attention.
Institutional investors have long been intended as the missing piece in the Bitcoin puzzle. Not only do you have clients with larger portfolios, but you also have the investment needed to appreciate the characteristics of Bitcoin that make it a mainstay in portfolios in the current macroeconomic environment.
With a wave of lower interest rates likely to keep fiat currencies in the background, investors are desperate for some hedge against currency depreciation. the usual protection has lost part of its edge. And while Bitcoin is unlikely to usurp gold, it could bridge the gap.
A decoupling of gold from fiat currencies, the Covid-19 pandemic, and central banks’ desire for aggressive quantitative easing measures could lead to explosive price growth for bitcoin in the future, said Thomas Fitzpatrick, global head of the company’s CitiFXTechnicals market.
Others on Wall Street have also advocated the idea of Bitcoin as a complement or, in some cases, an alternative to gold.
“There is a revaluation of its value as an alternative currency, as an alternative to gold.” said Nikolaos Panigirtzoglou, analyst at JPMorgan (NYSE :).
The introduction of Bitcoin by major traders like Square Inc. (NYSE 🙂 and PayPal Holdings Inc. In the meantime, (NASDAQ 🙂 will go a long way towards legitimizing the use case of Bitcoin and promoting engagement.
PayPal has over 300 million active users who can now use their cryptocurrency funds to pay for goods and services. PayPal’s user army has already shown good demand, prompting the fintech giant to push its limits on crypto purchases.
PayPal increased its weekly crypto purchase limits from $ 10,000 to $ 15,000 just weeks after it was announced that it would enter the crypto battle on October 21.
The surge in Bitcoin has also been compounded by an issue as old as investing itself: supply and demand.
With only 21 million Bitcoins in circulation and around 3.4 million Bitcoins still available for trading, the “Bitcoin rush” has started.
The bear suitcase
This is a bubble caused by a temporary weakness in the global economy. Real world acceptance is still a distant dream that makes the asset irrelevant in the world of trading, investing, and even payments.
If you can’t pay your taxes, your employees and your vendors, there is no ultimate demand for this product, except maybe in the illegal goods and services market! That will keep it from going to zero. Unless it can be used to multiply the capital, it is not an investment. It’s an advantage, but purely speculative, and one thing we know about speculative bubbles is that they eventually burst.
One of the side effects of the trillion dollars that central banks around the world injected into the global economy through quantitative easing to fight the coronavirus crisis has been the creation of asset bubbles, of which this is a prime example. The price has risen from under $ 5,000 at the end of March to around $ 18,000 today.
The European Central Bank pretty much guaranteed more generosity in December, and the Federal Reserve may well follow suit to fight back the effects of the recent surge in Covid-19 cases. However, recent positive vaccine news certainly means this will be the last hurray for QE, and then what for cryptocurrency?
After all, it’s been more than 10 years since his invention and widespread uses are very thin, which is nowhere near enough to justify this high rating.
Every thought that Bitcoin could be used as a reserve currency has faltered – no country wants another parallel currency that it cannot even control. Likewise, it doesn’t really work as a medium of exchange as it is neither widely distributed nor accepted as a store of wealth due to its volatility.
This means that Bitcoin works in a similar way to gold, that is, an asset with a limited supply that does not generate income. Still, gold is only up 20% since the start of the year, compared to Bitcoin by 150%.
There is also concern about what will happen if the Federal Reserve starts raising interest rates and competing investments start generating decent levels of income. This may not happen in the short term, but government bond yields have already risen, admittedly from a low base. The 10-year benchmark’s return is up nearly 8% this month.
With such a sharp surge already behind it and with the bitcoin know-how looking for greater fools to sell to, a significant downward trend is very likely.