Bitcoin that shot last year opened the year 2021 with a new takeoff – in just a few days, it has risen in price by 20%. The debate that bitcoin can squeeze gold as a defensive asset in crises is only flaring up, and new historical records are expected from the cryptocurrency. How long will Bitcoin continue to rise in price and where is the ceiling for this growth?
The cost of the most popular cryptocurrency – bitcoin – has grown by 20% since the beginning of 2021 and is approaching 35 thousand dollars. This is a new historical maximum. The market capitalization of the cryptocurrency is now $ 640 billion. According to this indicator, Bitcoin almost caught up with Elon Musk’s Tesla, whose capitalization is slightly more – $ 670 billion.
After Bitcoin crashed in March 2020 along with other assets, this currency has risen in price more than eight times. And since the lows of September, Bitcoin has more than tripled in value.
What is helping this new currency reach such heights? Blame for the fall in the dollar to multi-year lows against many currencies, including the euro this week. Moreover, many analysts expect the dollar to weaken even more in 2021. Because they are confident that the United States will continue to inject more and more dollars into the world economy in the form of additional measures of economic support for the American population and business in a pandemic.
How much the dollar will fall depends on how effectively the United States will fight the coronavirus with a vaccine. Any delay in mass vaccination will lead to new rounds of global dollar depreciation.
The US Federal Reserve is also weakening the dollar, which is expected to keep interest rates low for a very long time.
All this forces investors to insure inflationary risks by buying bitcoin and gold, the head of the investment company Morgan Creek Capital Management, Mark Yusko, said in an interview with CNBC.
Some analysts are predicting incredible heights for Bitcoin.
The price of bitcoin could repeat the rise of gold in the 1970s and reach the $ 318,000 mark in a year.
Citi analysts are not excluded.
The investment director of Guggenheim Investments predicted that the bitcoin price could eventually reach $ 400,000.
Gold and Bitcoin have become assets in the “safe haven”. In 2020, a controversy erupted over whether the main cryptocurrency, bitcoin, could become the new gold that could insure an investor portfolio against inflation. As you know, historically, it is traditional gold that becomes a saving asset in times of crisis, where investors prefer to wait out turbulent times in the economy.
The demand for gold hasn’t gone anywhere this year. Investors are still looking for salvation in it. Gold showed its best performance in 2020 since 2010. In August, the metal soared to record levels of around $ 2,075 an ounce, and in October physical gold in precious metal-backed exchange-traded funds (ETFs) also hit record highs.
However, when there was a breakthrough in vaccine development, gold and silver as defensive assets fell immediately. Paradoxically, Bitcoin continued to rise in value anyway. By the end of the year, gold, thanks to the continued decline in the dollar, managed to grow and show excellent dynamics in general.
However, the new trend of 2020 is the increasing popularity of the hit Bitcoin. Moreover, not only among technology fans and speculators, but also among the wider public, reports ProFinance.
Private investors, institutional investors – banks and funds, heads of the largest companies are actively entering the crypto market, says Artem Tuzov, executive director of the capital market department at IC Univer Capital.
Some believe that bitcoin is even beginning to crowd out gold. “More and more investors are starting to see bitcoin as a reliable investment. Also, it looks like
bitcoin is beginning to replace gold as a hedging tool for various risks, such as dollar and inflationary risks, ”
– notes the strategist of Deutsche Bank Jim Reed.
However, Goldman Sachs analysts believe that bitcoin and gold are still not fungible assets, so bitcoin will not deprive gold of its status as the main savior from inflation in times of crisis.
Bitcoin still has big drawbacks that institutional investors and the rich alike fear. The first is opacity. Secondly, it is a too speculative asset, which means it is extremely risky. A record rise may be followed by record crashes. This has already happened in the history of bitcoin.
The story of 2017 is instructive, when the price of bitcoin skyrocketed – from September to December six times, from 3.8 thousand to 20 thousand dollars. However, by February 2018, the bitcoin rate fell to $ 6,000, and after that it was under pressure from sellers for a long time.
“It may well turn out that in a year bitcoin will cost the same as now. An upward wave is often followed by an extended decline. Reaching new all-time highs and stopping there is likely to set off a huge wave of profit taking by long-term investors who settled in Bitcoin back in 2017. Investors in bitcoin are very easily inspired, but also quickly become disillusioned, ”explained Alexander Kuptsikevich, lead analyst at FxPro. If we evaluate the options for the growth or fall of bitcoin, then we can say that the chances are 50 to 50, adds Tuzov.
For bitcoin, some expect its value to rise from 35 thousand dollars to 400 thousand dollars. The problem is that the likelihood of Bitcoin dropping from $ 35,000 to $ 6,000 is no less. As for gold, no one expects such jumps on it. The consensus forecast for the metal is as follows: in the first quarter of $ 1890 per ounce, in the second and third quarters – $ 1950, by the end of 2021 – $ 1900. In 2022 and 2023, an ounce will cost $ 1,850 and $ 1,700, respectively. Investors are betting on people’s victory in the fight against coronavirus.
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