Will Bitcoin Reach Its Previous Highs By Year End?
It is clear that Bitcoin has been on a bullish uptrend for the past year and its value has risen nearly 5x since March. This had led many traditional investors to wonder if now is the time to hop in on the nontraditional bandwagon with this decentralized currency.
Driving The Surge
Many factors are driving Bitcoin’s recent price surge. For one, PayPal has recently allowed its users to buy and sell Bitcoin, which is huge news for Crypto investors, even though users will not own their private keys.
Another reason for the surge is the fact that companies like MicroStrategy and Square have been investing stockpiles of money into the currency, with nearly half a billion invested between these two alone this year.
Recent distrust between governments during the COVID-19 pandemic may also have something to do with this rally. Investors cynical of their government’s choices likely get a sigh of relief from having a non-government-controlled and deregulated currency at their hands like Bitcoin as opposed to traditional FIAT currencies.
Other investors see investing in Bitcoin as a hedge to stop losses in times of economic recession and rising inflation. Bitcoin, not being owned or controlled by any person, company, or nation, won’t tank due to most economic factors, and won’t get pumped full of artificial stimulus money during a downturn. Finally, with the issuance of new Bitcoin being cut in half in 2020, many investors see this as confidence in future price security for the cryptocurrency giant.
Increasing Confidence in Cryptocurrency
Many will cite the numerous peaks and falls of Bitcoin as a reason for them not investing in it. Many retail investors who bought in at the peak of the market in December of 2017, watched their investment crash and loose over 85% of its value.
As of 2020 however, Bitcoin has outperformed the US Dollar by over 150%. Bitcoin has also outperformed the NASDAQ, Dow Jones, and the S&P 500. Even if they aren’t going all-in on it like some people do, many investors are now using Bitcoin as a way to diversify their portfolio, as an increasing number of brokerages have added Bitcoin and some Altcoins as alternatives to other stocks, driving up the price as demand increases.
As proof of this, one needs to look no further than Grayscale. They have been purchasing ever increasing quantities of Bitcoin over the recent quarters. Due to these investments, they recently tweeted about hitting over $10 Billion of BTC assets under management.
Bitcoin Price Sustainability
Many armchair economists were quick to call Bitcoin a bubble when it crashed in 2017-2018. They did this without realizing that was before a time when ‘real’ investors were bullish on the currency. As we just mentioned, most of the actual investors in Bitcoin at the time were over-leveraged techies and Bitcoin miners.
Thankfully, with the recent halving event, the price of Bitcoin is less based on mining (which was heavily affected by the prices of GPUs surging the past few years) and more based on actual investing.
Stanley Druckenmiller, a hedge-fund billionaire famous for his action of shorting the British Pound with George Soros in 1992, has recently come out in favor of Bitcoin. He argues that government fiscal policy makes Bitcoin inherently more stable than government currency and that Bitcoin will work better as an investment than gold, the traditional inflation hedge.
Paul Tudor Jones, the famous billionaire investor who predicted the 1987 stock market crash has also added Bitcoin to his portfolio.
He stated to other investors in a letter regarding government inflation and stimulus spending:
“We are witnessing the Great Monetary Inflation—an unprecedented expansion of every form of money unlike anything the developed world has ever seen.”
For anyone still wondering if the number 1 digital asset will return to its all-time highs before the end of the year… maybe we only have to look at what the ‘smart money’ is doing… even they are looking to Bitcoin.