Bitcoin has stood at the top of US$28,000, equivalent to 180,000 yuan. In the past few days, Bitcoin has continuously hit record highs. As of the end of December, Bitcoin’s rate of return this year has reached 270%. If nothing else, Bitcoin has become the asset with the most outstanding return on investment since the beginning of this year.
According to the CoinMarketCap data line, the market value of Bitcoin has exceeded 70% of the entire cryptocurrency market value, setting a new high since March 2017.
In just 11 days, the price of a bitcoin continuously broke through 8 integer barriers, ranging from US$21,000 to US$28,000, and its market value was once 1 trillion yuan higher than that of a-share “market value king” Moutai. This is the “crazy” Bitcoin.
BTC becomes the world’s 20th largest currency
Bitcoin broke through $28,000, making it the 20th largest currency in the world. According to fiatmarketcap data, the market value of the “global currency” bitcoin is 18,582,543 BTC in terms of BTC. Compared with the global legal currency, it ranks 20th, but it is comparable to the first and second renminbi and the US dollar. Compared with Bitcoin, the scale of Bitcoin is still far away.
At the same time, the market value of Bitcoin surpasses Visa, the world’s largest financial institution. According to companymarketcap data, Bitcoin has surpassed Visa, which has a market value of US$490 billion, with a market value of US$499 billion, becoming the world’s largest financial “company”. It is strange to call Bitcoin a “financial company”. It is the only one labeled “Worldwide” in this ranking.
Can BTC break $30,000 before the end of the year
There are only three days left before the end of 2020. Whether Bitcoin can exceed $30,000, many people are looking forward to it. With reference to Bitcoin’s recent performance, this may be a high probability event.
In the eyes of many industry experts and practitioners, Bitcoin’s recent skyrocketing is mainly due to the trend of the global economy, the impact of the epidemic, and the influence of sovereign digital currencies launched by various countries. At the same time, unlike the surge in 2017, the rise of Bitcoin this year is mainly driven by large institutional investors.
This round of rise may be because the epidemic has once again intensified the expectation of global economic recession. Global inflation has become an unstoppable trend. Deflation assets with anti-inflation properties are inherently scarce resources, and the demand for Bitcoin has further increased.
In 2020, we have experienced black swan events such as the “pandemic” and “negative oil prices” that have not been seen in a century. In response to the economic recession brought about by the epidemic, countries have adopted quarterly loose monetary policies, and interest rates have been repeatedly reduced. The European Central Bank has implemented Negative interest rate policy, and the US federal benchmark interest rate has also been close to zero. Similarly, the total assets of the Federal Reserve and the European Central Bank have nearly doubled since the beginning of this year, and currently reach 7.38 trillion US dollars and 7 trillion euros respectively.
On the one hand, due to the impact of the epidemic, the recovery of the global economy will slow down in the coming year; on the other hand, the central bank’s extremely loose monetary policy has pushed up inflation expectations in the financial market. In an economic environment of high inflation and low growth, in order to avoid the loss of nominal principal and the need to pursue higher returns, investors’ demand for hoarding cash has naturally evolved into demand for gold and Bitcoin.
As a result, market expectations for Bitcoin-compliant products have further increased, and many licensed investment institutions have established digital currency funds or applied to regulatory agencies to trade digital currencies, which has helped to boost the price of Bitcoin.
On the whole, the apparent reason for the main push of Bitcoin’s skyrocketing is definitely a shortage of supply, but why the supply exceeds supply is the key to the problem. This may be due to the further expansion of Bitcoin’s production reduction effect.
The Bitcoin market has a cycle of approximately four years. At present, Bitcoin has gone through three rounds of market cycles. In each cycle, we can also clearly observe the prosperity and depression, recession and recovery of Bitcoin.
Bitcoin has had two halvings in history, and each time the halving market, Bitcoin prices will usher in a wave of bull market. On May 12, 2020, Bitcoin completed its third halving and started its fourth cycle. Intuition tells us that the price of Bitcoin will rise after the production cut.
Now we look at the impact of Bitcoin production reduction on prices in the long run. Assuming that the supply and demand of Bitcoin grow at the same rate over time (from actual observations, the growth rate of demand is greater, but this factor does not affect our analysis. It can be seen from the above figure that the supply and demand curves of Bitcoin are shifting to the right as time goes by. When Bitcoin is halved, the growth rate of supply slows, causing the price of Bitcoin to rise .
In the short term, Bitcoin fluctuates sharply. From a long-term perspective, due to the impact of reduced production and increasing demand, the price of Bitcoin has shown an overall upward trend.
Behind the rise in bitcoin prices, the halving of production is a key factor.
Will it collapse like three years ago?
Will Bitcoin crash again as it did three years ago? the answer is negative.
In 2020, people’s understanding of Bitcoin has undergone major changes. US PayPal users can already use their accounts to buy, sell and keep bitcoin. The Spanish Foreign Bank recently announced the launch of a test, which will be the first trading service provided by the bank for the sale and custody of digital assets. This new service allows users of the bank to use Bitcoin for transactions or use it for savings.
JP Morgan Chase Bank, once known as a “scam” in Bitcoin, now also believes that Bitcoin will eventually replace gold as a safe-haven asset.
To sort out the source of the change in concept, one must look at Wall Street. The Wall Street financial community has begun to treat Bitcoin as an investment asset, and its status can be comparable to traditional investment assets. This concept is in contrast to 2017.
So, will Bitcoin crash as it did three years ago? As far as investment is concerned, it is difficult to make predictions, everything is possible. However, analysts generally believe that it is precisely the change in people’s perceptions and the participation of institutional investors that provide some protection for Bitcoin. Specifically, even if Bitcoin collapses, it will not be as violent as it was three years ago.
