- Many consider this rally due to increase in investors especially those with deep pockets
- The peer coins are also performing positively with the Bloomberg Galaxy Crypto Index gaining around 7.2%
Despite multiple controversies surrounding Bitcoins, it has successfully surpassed the level of $21,000 which was considered impossible in the beginning of 2020. Bitcoin did touch levels of $21,293 and has now set sights on $30,000 for 2021 which appears to be a realistic target.
Various crypto lenders consider this as a new era for Bitcoins despite losing 25% value due to the Covid 19 crisis. Many consider this rally due to increase in investors especially those with deep pockets. It’s also considered a store of wealth amid rapid money printing by Central banks around the globe. The huge inflationary pressure due to excessive spending via stimulus packages by governments is one of the key reasons to turn to cryptocurrency as a safe haven.
Is this Rally Silence Before the Storm?
These astronomical heights are always considered with an element of doubt especially after the previous crashes. However, this time the peer coins are also performing positively with the Bloomberg Galaxy Crypto Index gaining around 7.2%. Dash and Litecoin have progressed by 6% in this month. Ether, the second largest digital asset rose by as much as 6.9% and Coinbase was facing congestion issues.
One should ascertain that market sentiments are bit different this time and even CME Group Inc. (world’s largest Financial Derivatives exchange) has plans to expand its suite of cryptocurrency derivatives offerings to include Ether futures commencing early next year.
The uncertainty looming over economic recoveries due to the pandemic has positioned bitcoins as a premier hedge against conventional equities. Institutional investors have tilted towards digital currency in the recent months but with new of vaccination gaining speed, it would be interesting to know how far this rally will progress.
Another aspect that should be considered is the supply side factors. Few months ago, Bitcoin was undergoing halving whereby the rewards from a single block would be cut into half. This did prompt speculations that since fewer new bitcoins would enter the daily supply, a surge in prices was imminent. However, such episodes are expected to occur and the price was steady indicating the anticipation on the part of the investors.
Certain observers have also pointed out that increased crackdown on cryptocurrency exchanges especially in China for countering money laundering activities have impacted the suppliers in the market. Ultimately, this theory will be put to test once restrictions on withdrawals from Chinese crypto exchanges are lifted in the next few weeks.
Thus, there are multiple theories existing in the market causing the unprecedented bull runs in the market and all factors have to be considered before arriving at a final conclusion. Multiple speculations will continue to exist but an informed decision can be considered due to improved regulations and valid explanations leading to a rise in the value of cryptocurrency.
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