After in-depth analysis of Bitcoin breaking through $40,000, what’s the next step?

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If people believe in the value of Bitcoin, even if there are several crashes and bumps on this value road, it is actually normal. In fact, in the long run, Bitcoin should maintain an upward trend, even if many people think that there is a bubble, but as Georgetown University Finance Professor James Angel said, the history of the financial market is the history of the bubble— —So, don’t be afraid while facing the risks carefully.

On November 28, 2017, Bitcoin exceeded $10,000. On December 16, 2020, Bitcoin exceeded $20,000. On January 2, 2021, Bitcoin exceeded $30,000. On January 8, 2021, Bitcoin exceeded $40,000.

It took only 17 days for Bitcoin to rise from US$20,000 to US$30,000, and then it took only 7 days to rise from US$30,000 to US$40,000 and hit a record high. No matter if you are an “industry veteran” for many years, or a “coin circle novice” who has just stepped into this field, you must have questions at this time: Why is the price of Bitcoin rising so rapidly? Will Bitcoin crash?

In fact, Bitcoin was invented only 12 years ago. It is a new type of electronic payment system built on an Internet-based computing network and not under the control of any person, company, or institutional entity. The reality is that the history of bitcoin transactions is very short, and the asset valuation method has not been tested, so no one can really determine the value of bitcoin now or in the future.

But this time, digital asset investors and even Wall Street giants have issued price forecasts of $50,000, $400,000, or even higher, such as:

MicroStrategy CEO Michael Saylor predicts that with the entry of US$100-300 trillion, the price of Bitcoin may be pushed up to US$14 million. He even believes that Bitcoin will disrupt gold and become the world’s largest store of value in the future.

Sonny Singh, Chief Commercial Officer of BitPay, predicts that Bitcoin can reach $45,000 in 30 days, but he is cautious about the role of institutional investors in the future of Bitcoin because some giant companies may sell their holdings earlier than people expected Cryptocurrency in order to obtain profit.

Anthony Scaramucci, the founder of hedge fund Skybridge Capital, said that Bitcoin’s scarcity provides people with anti-inflation quality, because people want it when something is scarce, and now there is a historic opportunity to enter the institution. Before entering, it is estimated that the price of each bitcoin may reach 100,000 US dollars by the end of 2021.

Kucoin International CEO Johnny Lyu mentioned that this round of Bitcoin’s rise is straightforward and straightforward. Especially in the week before entering 2021, Bitcoin rose by more than $10,000. This is not only the huge buying power brought about by the entry of institutions, but also the combined force of the market to repeatedly pull Bitcoin to record many times. Under such market sentiment, Bitcoin is expected to rise further.

Dan Held, director of business development at Kraken, believes that Bitcoin’s current bull market may be part of the super cycle. The new crown epidemic provides a perfect macro environment for Bitcoin to show its value. Financial institutions finally understand the value of Bitcoin and are entering the Bitcoin market. Laid the foundation for a super cycle, the price may be pushed up to 1 million US dollars.

So, what are the key reasons for this bull market?

Key reason one: The demand from institutional buyers has grown, and many people have begun to view Bitcoin as a hedge against inflation. According to the white paper and source code design rules, the total supply of Bitcoin is only 21 million, which is obviously in sharp contrast with the Federal Reserve and other central banks that constantly print banknotes. Many institutions have begun to enter the market, such as:

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Large asset management companies including Tudor Investment and Guggenheim Partners have announced that they will “betting” on the CME Group Bitcoin futures contract;

Analysts at JPMorgan Chase, the largest U.S. bank, recently predicted that Bitcoin could soar to $146,000;

Bloomberg analyzed in the latest cryptocurrency outlook report that $20,000 is already the “new base point” for Bitcoin, and the next resistance level will be $50,000. If you can refer to historical data, one year after the supply is reduced, the resistance of $50,000 will be easily broken;

Morgan Stanley purchased 792,627 shares of MicroStrategy, a business intelligence software company, in December 2020, accounting for 10.9% of the company’s total shares.

The second key reason: the decline of the US dollar in the foreign exchange market. The U.S. dollar index is a measure of the exchange rate between the U.S. dollar and the euro and yen. However, in 2020, the U.S. dollar has fallen by 6.8%, and this decline will continue in 2021. The U.S. dollar is very important to Bitcoin, because Bitcoin prices are mainly denominated in U.S. dollars. The biggest reason for the decline in the US dollar is that the Fed has issued more than 3 trillion US dollars of currency in the past year, which is equivalent to three-quarters of the total US dollar issuance in the past 108 years. On January 6, the U.S. Capitol was violently attacked by demonstrators. This is likely to be the fuse of the weakened U.S. leadership on the global stage. Many economists predict that the U.S. government under the control of the Democratic Party will introduce a large spending plan and new stimulus bills, so that the government budget deficit will continue to expand in the next few years, and most of the additional costs are through the newly printed US dollars. Achieved.

Key reason three: retail investors are more likely to buy Bitcoin. You will find that buying Bitcoin is becoming easier and retail investors can directly buy on payment service providers such as PayPal and Square. For example, Paypal’s daily cryptocurrency transaction volume has exceeded $125 million, and With the continuous expansion of cryptocurrency trading services, the transaction volume will increase further. It is worth mentioning that, according to the analysis of digital asset company ByteTree, the current single bitcoin transaction amount is mainly concentrated in the range of $600, which is similar to the amount of relief provided by the US stimulus bill.

In the bull market, exchanges are the most active

Just after the price broke through $40,000, Bitcoin’s actual trading volume on various cryptocurrency exchanges also soared to twice the previous highest level. According to Messari analysis data, in the first week of 2021, the Bitcoin transaction volume of several major cryptocurrency exchanges in the world exceeded US$67 billion. The previous high point of transaction volume occurred in mid-2019, when the price of Bitcoin fell below After 4,000 USD, it rebounded briefly to the 10,000 USD range, which triggered a weekly turnover of 32 billion USD. (Carbon chain value note: Messari’s actual Bitcoin transaction volume indicators have been summarized and adjusted data from a number of leading cryptocurrency exchanges, such as Bitfinex, Coinbase Pro, Kraken, and Poloniex.)

However, although the market is improving, many people still have doubts, that is, the trading volume of this cryptocurrency exchange hit a record high, how is it different from the last bull market? Will there be a longer bear market after the bull market, like last time? It is worth mentioning that before the bull market officially opens in 2020, some people in the industry have indeed “foreseen” a substantial increase in the market, but what many people did not expect is that the new crown virus epidemic will include cryptocurrencies. The global financial market in China has hit hard, causing Bitcoin to fall to the $3,000 range on “Black Thursday” on March 12, when many retail investors did choose to sell.

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But things are different now. With Bitcoin doubling from $20,000 to $40,000 in a very short period of time, the trading intensity of this exchange has obviously increased significantly.

Judging from the current market environment, it means that more market participants want to “buy” rather than “sell”-the numbers will not lie:

According to Chainalysis data, on January 9, the inflow of bitcoins to cryptocurrency exchanges reached 127,772, which was higher than the 180-day average;

According to Glassnode data, on January 9th, the inflow of Bitcoin (a 1-day moving average) to cryptocurrency exchanges hit a record high, reaching US$132,812,085.62;

According to Chain.info data, on January 10, the balance on the cryptocurrency exchange chain has exceeded 2 million BTC, and a total of 125 large-value deposits and withdrawals in 24 hours (carbon chain value note: “large amount” refers to an amount greater than Or equal to 50 BTC transactions);

According to data from the cryptocurrency data service provider CoinMarketCap, on January 10, Bitcoin’s single-day transaction volume also exceeded $85 billion.

It should be noted that due to different data sources, the data provided by different cryptocurrency data service providers are also different. For example, Coingecko’s single-day transaction volume data is 77 billion US dollars.

Why are cryptocurrency exchanges the most active in the bull market? In fact, despite some inherent risks, the vast majority of people, whether they are institutional investors or retail investors, are still willing to custody/deposit wealth in cryptocurrency exchanges. According to the latest survey data at the end of 2020, 92% of the cryptocurrency market participants are willing to choose to “hand over” their bitcoins, stablecoins, etc. to trusted exchanges, rather than choosing to control them by themselves-at least for this stage Look, exchanges are still the most popular crypto asset custody option, rather than hardware wallets that some professionals think. In addition to cryptocurrency exchanges, the second most popular cryptocurrency custody option is cold wallets, and the last one is third-party custody service providers.

In addition to the historical high of trading volume, the network traffic of cryptocurrency exchanges has also reached a peak. According to the network traffic data of cryptocurrency exchanges released by The Block, it can be seen that the number of visitors to crypto exchanges has approached 200 million, a record high .

Since exchanges are the most active in the bull market, perhaps we can compare the performance of cryptocurrency exchanges through platform currencies.

If you compare the 7-day, 14-day and 30-day platform currency gains in weight, Kucoin’s KCS performs best, and of course Huobi’s HT and Matcha’s MX.

Most of the cryptocurrency transactions have launched their own platform currency after they have a certain strength. Generally speaking, the better the trading platform is, the more room for the platform currency to rise. Thanks to the recent improvement in exchange traffic and trading volume, the corresponding cash withdrawal and transaction fee income will continue to rise. As long as the exchange income increases, the rise of platform currency will naturally be reasonable. As traffic and transaction volume hit new highs, the platform currency of cryptocurrency exchanges has also performed better and better, because platform currency is directly generated by the cryptocurrency trading platform, and its value is directly reflected on the platform.

In general, as the price of Bitcoin has repeatedly hit new highs, as an important part of the crypto ecosystem, exchanges seem to be taking advantage of this shareholder’s wind to advance. So, can this trend continue?

After 40,000 USD, where will Bitcoin go?

As we all know, the price of Bitcoin fluctuates greatly. From a historical point of view, a collapse after a surge is likely to be imminent. Although Wall Street and many investment predators are very optimistic about Bitcoin, some insiders have also put forward cautious opinions.

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Joe DiPasquale, CEO of cryptocurrency hedge fund BitBull Capital, pointed out that Bitcoin “has been very unstable”, for example, on January 4, just after the Bitcoin price climbed to a high point, it suddenly plummeted. Nearly $7,000. Joe Dipasquale believes that the main reason for this situation may be that someone uses too much leverage, so it is easy to be eliminated.

According to Gavin Smith, CEO of Panxora, a digital asset company, almost every year since 2013 has seen the price of Bitcoin drop by more than 25% from the high point of the year, so if you see Bitcoin rise Don’t be surprised if it hits 70,000 US dollars or 80,000 US dollars and then plunges by 40%.

KuCoin International CEO Johnny also mentioned, “With the recovery of the crypto market, many exchanges including KuCoin have seen a surge in trading volume recently. The cumulative trading volume of KuCoin has exceeded 100 billion U.S. dollars recently. It shows that the investment enthusiasm of the market is ignited, and it will be a high probability event for Bitcoin to continue to break through the high point. However, this process will not happen overnight. There will inevitably be several big callbacks in the middle. The callback rate of more than 20% is also common in the crypto market. Yes, investors should pay more attention to risks while paying attention to currency prices.

Mike Venuto, co-investment manager of the Amplify Transformational Data Sharing exchange-traded fund, which invests in blockchain-related stocks, said that the price of bitcoin may rise two to three times from the current level, and then fall back to the current level, which may be quite Two-thirds of the retracement-of course, for Bitcoin, a short-term plunge of more than 50% is not impossible, because it has happened several times before, such as the short period from mid-December 2017 to early February 2018 In three months, Bitcoin plummeted from about $20,000 to $6,550, and then did not return to the $20,000 level for three years.

In fact, no one knows where Bitcoin will go. After all, most people cannot predict the future. Today it may be $40,000, tomorrow it may be $100,000, but the day after tomorrow it may be $5,000. But this time and the last “bull market + bear market” there is one biggest difference, that is the outbreak of the new crown virus in 2020, the U.S. government has to issue additional trillions of dollars to deal with the impact of the economic depression, but a little bit economic People of common sense know that additional issuance of US dollars will trigger long-term inflation and even a financial crisis. In the case of failure of the traditional financial system, the scarcity of Bitcoin will undoubtedly attract more attention, and some savvy investors have begun to try to diversify their investments to diversify risks.

On the other hand, today’s Bitcoin is not in the early stage of adoption. As more and more large institutions regard Bitcoin as a product to hedge traditional market risks, consumers are also beginning to try to trade numbers in their daily lives. Currency, Bitcoin is becoming part of the core investment portfolio of many institutions, and will also become a universal payment method.

If people believe in the value of Bitcoin, even if there are several crashes and bumps on this value road, it is actually normal. In fact, in the long run, Bitcoin should maintain an upward trend, even if many people think that there is a bubble, but as Georgetown University Finance Professor James Angel said, the history of the financial market is the history of the bubble— —So, don’t be afraid while facing the risks carefully.