Published: December 25th, 2020
After waiting for almost three years, Bitcoin investors recently celebrated when the world's first cryptocurrency pulled a massive rally and broke the $19,850.11 record it set in December 2017. The milestone was recorded towards the end of November. However, the cryptocurrency has been surging for some time now, climbing past $20,000.
According to the CoinDesk Bitcoin Price Index (BPI) data, the price of the world's first cryptocurrency jumped past a three-year, setting a new record in the process. The price later jumped past $20,000 on Thursday, December 17.
For long-term Bitcoin investors, this is just one other bearish cycle. The only difference is that this particular cycle has brought more gains than has been witnessed in almost three years. However, for newer coin holders, the new records validate the resilience that the Bitcoin exhibits.
Kevin Kelly, the co-founder and global head of macro strategy at Delphi Digital, a research company specializing in the digital assets market, said the new record, especially in dollar terms, cannot be taken for granted. Kelly, a former longtime equity analyst at Bloomberg, said that the latest events are a statement.
Many skeptics had denounced Bitcoin publicly for underperforming even when the financial markets provided a favorable macro backdrop. He added that the new record is another statement that Bitcoin is in power to stay.
The favorable backdrop has been facilitated in part by the unmatched era of increased central banks' spending to tame the coronavirus pandemic's devastating effects. Many Bitcoin investors now see the cryptocurrency as a hedge against imminent inflation from the currently implemented loose monetary policies.
Bitcoin has gained 167% year-to-date. After dipping more than 50% on a single day in March, touching yearly lows, the coin has surged more than 400%. Bitcoin's positive correlation compared to traditional markets has remained above 0.4, which is somewhat firm.
According to Coin Metrics, an online provider of actionable crypto market data, the new information contrasts the longstanding narrative peddled by Bitcoin investors that virtual currencies do not have any correlations with traditional markets. However, Kelly warned that traders should be aware of the challenges affecting the cryptocurrency space.
He said that the regular crypto exchange outages coupled with skepticism, especially from new investors about the reliability of available market data, put a dent in the coins' reputation. However, he said the cryptocurrency sphere's adolescent nature is a blessing in disguise since it indicates room for maturity.
The current rally is right for the cryptocurrency sphere and beyond. Cryptocurrency market analysts agree it is healthy and bet on the surge to continue, especially as retail and institutional money keeps flowing into Bitcoin.
PayPal and Square, two of the many eager mainstream payment companies, continue channeling retail capital into the cryptocurrency arena. These two companies' actions are adequate evidence of Bitcoin and cryptocurrencies' interest among financial industry players.
Besides, the returns on investment keep getting better. According to Square's performance report for Q3, the company managed an impressive $1 billion in Bitcoin revenue from its CashApp mobile wallet alone.
On the other hand, PayPal, after announcing that it is launching a service to support Bitcoin and other altcoins in October, was forced to remove a whitelist enlisting clients to the service less than one month after the announcement because of oversubscription.
While retail capital is flowing in, institutional capital is surging too. A considerable part of the institutional funding is fueled by the record advancement of the CME Group's Bitcoin futures market.
In mid-November, open interest for the cryptocurrency's futures offered on the CME Group's exchange increased to a record $976 million following an escalation of institutional capital inflows into Bitcoin and its derivatives markets.
Some of the high-profile investors that threw Bitcoin futures over the top include Stanley Druckenmiller, a billionaire hedge fund manager, veteran investor Bill Miller, and Paul Tudor Jones, a pioneer hedge fund manager, crypto enthusiast extraordinaire, and entrepreneur.
Another figure who pushed the surge is Rick Rieder, the chief investment officer at BlackRock, an investment management company based in New York. These luminaries' actions show that the mainstream financial environment's perception of Bitcoin and altcoins is warming significantly. Their efforts have incited more players to put more capital into Bitcoin.
Karim Helmy, a data analyst at Coin Metrics, said that the elementary outlook supports a sustained Bitcoin rally, which remains more robust than ever. Besides, the number of active Bitcoin addresses has increased to a record high. The Bitcoin network's economic density, a representation of the value transacted for every byte, has also surged closer to levels witnessed in the last bull run, Karim said.
Despite the stiff competition from a handful of cryptocurrencies jostling for investor mindshare, Bitcoin has outshone every one of them. Most altcoins are still tens of percentage points down compared to their record highs. For instance, Ether is almost 60% from the all-time high record it etched in 2017.
Litecoin (LTC) and Ripple (XRP) are 77% and 82% from their best posting ever, respectively. According to The Tie, an alternative data services provider for digital assets, Bitcoin's recent record comes on the backdrop of astonishingly low publicity from both media outlets and mainstream audiences.
For instance, the total number of Bitcoin-related tweets is considerably low compared to the 2017 numbers. Besides, the said figures have been almost flat for the past two years. And, internet searches for Bitcoin are a paltry 20% of the 2017 data.
According to Ryan Watkins, a bitcoin analyst at Messari, these numbers might indicate that not many people outside the industry cared until Bitcoin pulled another big one.
The world's first cryptocurrency is sustaining an impressive rally that has seen its price rise to almost $24,000. While most industry insiders see a few parallels with the 2017 rally that brought the price to just under $20,000, the recent surge also presents stark differences. However, there is a unanimous agreement that sustained inflow of both retail and institutional capital is doing the entire cryptocurrency sphere a lot of good.