Bitcoin unleashed a monster bullish rally unlike any other in its history towards the end of 2020. It smashed the 2017 all-time high of $20,000 and has gone past $30,000. And although investors/traders are trying to relate the current Bull Run with 2017’s bull run, the current bullish trend seems to be buoyed by more concrete factors than that of 2017.
Most investors are yet to recover from the losses that the retracement that took place immediately after the 2017’s rally hit its peak. At the time, most traders thought it was time for Bitcoin to move even higher owing to the vigour in which its prices had skyrocketed but only to be caught off-guard when the prices plummeted to below $4,000 from $20,000 in less than three months. Those who had done impulse buying just towards the end of 2017 due to FOMO (fear of missing out) as they witnessed the sudden price movement were left in disarray after the sudden drop in prices and had to wait for two years to make up for the losses they incurred. And there is any of them that was patient enough to hold on till today, they are rejoicing since the investments are now bearing fruits.
The experience of the price dip that followed 2017’s Bull Run still haunts most Bitcoin investors to date and many are still sceptical about Bitcoin currently going any further. Most traders are looking for the slightest signs of a pullback and the sell orders will start being pushed.
However, on the contrary, the current bullish trend seems to be very determined and despite the two slight pullbacks that have occurred, it has bounced back with even more momentum.
Why current Bitcoin rally can’t be compared to that of 2017
In 2017, much of the Bitcoin Price movement was largely influenced by individual traders and the increased trading activity around the festive season in December. And although those factors were still in play in 2020’s December, they are not the main factors behind the rally.
According to analysts, the main factors behind the current Bitcoin rally are:
- Institutional investors
Analysts note that 2020 saw several institutions/companies invest in Bitcoin thus increasing Bitcoins standing among the rest of the cryptocurrencies.
Some of the companies that invested a considerable amount in Bitcoin were Square, PayPal and MicroStrategy.
The institutional investors show the growing confidence among institutions about Bitcoin being a better investment compared to the traditional havens like Gold.
- Bitcoin supply scarcity
Bitcoin has become one of the most adopted cryptocurrencies around the world. Businesses are continuously accepting Bitcoin as a mode of payment and there are even Bitcoin Cards and ATMs.
The increased adoption means that there are more and more people who are finding it necessary to buy/acquire bitcoins.
However, the digital currency has a hardcore limit of 21 million coins which is only 0.27% of the world’s population. This means that even after all the 21 million Bitcoin coins are mined and introduced to the market, they will not be enough for even 1% of the world population.
And according to the demand and supply rule, reduced supply in the market sends the prices ricing exponentially corresponding to the demand.
Bitcoin price – The $50,000 target
The bitcoin prices are still in an upward ascent even after moving $10,000 above the previous all-time high of $20,000.
Currently, the price of Bitcoin is about $31,344.28 coming from a slight sudden drop that saw it plummet from above $34,366.12 to about $29,413.16 between January 3rd and 4th.
And although several analysts and investors see the current Bitcoin price being too overstretched, some believe the force behind the rally will see it move past $50k and even possibly move towards $100k in 2021.
JPMorgan in a note on the 4th of January 2021 said, “We believe that the valuation and position backdrop has become a lot more challenging for bitcoin at the beginning of the New Year.” The note went ahead to say, “While we cannot exclude the possibility that the current speculative mania will propagate further, pushing the bitcoin price up towards the consensus region of between $50k – $100k, we believe that such price levels would prove unsustainable.”
Thomas Lee, an analyst from Fundstrat, of 30th December 2020 said that Bitcoin price would quadruple in 2021, which means it would climb above $100,000 and also noting that 2021 climb would be parabolic just like that of 2017
Lee’s outlook followed right on the heels of another outlook from David Grider, a Lead Digital Asset Strategist at Fundstrat who had raised Bitcoins outlook to $40k.
And considering that on January 3rd, 2021, Bitcoin prices had risen to over $34,000, the $40,000, the digital coin can hit the $40,000 in a few weeks, which would make the $50,000 target also very realistic.