“Digital gold” breaks records. In the last month alone, bitcoin has gained more than 50 percent, and its value has increased almost fourfold over the year. While some forecasts predict that the price will continue to rise sharply, analysts addressed by the online daily Aktuálně.cz expect that the investment bubble will probably burst again. However, the damage may not be as massive as it has been in the past.
<p data="The end of 2020 was a success for bitcoin. In December, for the first time in history, the price exceeded the limit of 20,000 US dollars (over 420,000 CZK) per coin. With a strong position on the market, the cryptocurrency also entered this year, when it reached the value of $ 30,000 (less than CZK 640,000).
<p data="It broke another record on Wednesday – $ 35,000 (approximately CZK 741,500) and has now even surpassed the $ 40,000 (CZK 840,000) mark, doubling the price in just three weeks.
<p data="According to analysts, the so-called “FOMO” effect (from the English Fear of Missing Out) has taken over the market. This raises the fear that investors will miss a unique opportunity in the market. “Many speculators frantically started buying cryptocurrencies, which significantly increased their price. This psychologically questioned more restrained individuals who could not stand it and also entered the market,” explains analyst Štěpán Křeček from BH Securities for Aktuálně.cz.
<p data="At the same time, the digital currency has recently benefited mainly from demand from larger investors. “Today, every twentieth bitcoin already belongs to 28 large companies and funds,” adds Dominik Stroukal, the chief economist of Creditas. The support of the payment service provider PayPal, which has decided to accept bitcoin as a means of payment, is also of interest.
<p data="Bitcoin is also significantly helped by the relaxed monetary policy of central banks and the wasteful policy of governments, when there is a large amount of money on the market. “This money does not end only in consumption, as central banks and governments would like, but also in investments,” Stroukal describes.
<p data="Newcomers are still coming to buy cryptocurrencies and consider them as an alternative to gold during a pandemic. According to analysts at the US investment bank JPMorgan, the price of bitcoins could even climb to $ 146,000 (CZK 3.1 million) in the longer term if it builds a safe haven position for investors in times of uncertainty.
Rapid growth, steep fall?
However, Bitcoin experienced similar “fevers” several times, always followed by a sharp fall. How close is the price collapse this time? “It’s a bit of crystal ball divination. Part of the market predicts that bitcoin could grow up to $ 50,000, I’m more inclined to slow down, and some investors may be sobering up. who will try to get rid of bitcoin, “points out Golden Gate CZ analyst Marek Brávník.
Bitcoin experienced a similar sharp growth in 2017, when its price climbed to almost $ 20,000 (over CZK 420,000). The following year, however, it fell to close to $ 3,000 (around $ 63,000). Therefore, some critics claim that a similar situation is now recurring.
“The turn of 2020 and 2021 has similar features that we could observe in the cryptocurrency market at the turn of 2017 and 2018. At that time, the sharp growth was followed by a sharp fall,” says economist Křeček.
Bitcoin will find a fair price
Analysts addressed by the online daily Aktuálně.cz expect further growth in the price of bitcoin, but subsequently a correction will probably take place. However, the damage is not necessarily fatal, as has been the case in the past. “Even after a possible decline, we can expect higher prices of cryptocurrencies than we were used to from mid-2018 to mid-2020,” adds Křeček.
Economist Stroukal from Creditas claims that the key role will be played by large investors. “If they last and don’t sell, we don’t have to see the correction that came after previous records. At that time, the price always fell by about 80 percent,” says Stroukal.
According to analyst Štěpán Hájek from Purple Trading, the correction will take place in the first half of the year – the market will find its “fair price”, where growth will stop for several months. “In the coming months, I would therefore expect a price between $ 25,000 and $ 35,000 (between CZK 531,000 and CZK 741,500),” said Martin Stránský, director of the largest domestic trader at Bitstock.com.
Wild cryptocurrency market
In connection with the record increase in bitcoin, the total volume of trade in cryptocurrencies also increased. It set its own record on Monday, with digital currencies trading more than five times as much during the day as the daily average in 2020, according to data from the British analytical company CryptoCompare.
There is also interest in so-called “altcoins” or any digital currencies that are not bitcoin – such as litecoin, monero and the like. For example, the value of the second largest cryptocurrency, ethereum, has risen to almost $ 1,200 over the past week. Nevertheless, etherere has not yet managed to exceed the maximum from 2018, which was $ 1,448 (around CZK 30,000).
Note: Prices are in dollars. You can compare the individual cryptocurrencies in more detail by clicking on the items in the infographic
Other cryptocurrencies are relatively lagging behind. “The reason is that they do not have the same use as bitcoin and, for example, the cryptocurrency XRP is not helped by the dispute with the US SEC (United States Securities and Exchange Commission – Note red.), which put it under strong selling pressure, “says Hájek from Purple Trading.
On the other hand, the most well-known cryptocurrencies have more interesting growth space than bitcoin. “With a possible correction, altcoins can be expected to jump against bitcoin in the short term, because investors often prefer to switch to other cryptocurrencies instead of withdrawing to bank accounts,” says analyst Stroukal.
Smaller cryptocurrencies have a chance to grow faster, but they can also collapse much more. “Even in a market as wild as cryptocurrencies, bitcoin is a conservative choice if the word can be used in this context at all,” Stroukal concludes.
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