So far, the balance sheet is impressive: Since the turn of the year, the Bitcoin price has climbed by around 140 percent, after having increased by around 100 percent in the previous year. However, this is only half the story: In the spring, by far the most important cryptocurrency, collapsed by around 50 percent and was on the threshold of $ 10,000 until October.
Since then we have seen the first phase of a buying frenzy, in 30 days it went up by 60 percent. Among the 20 largest cryptocurrencies, no other coin shows a stronger rally. Accordingly, the market share of Bitcoin in the entire crypto universe has recently climbed to around 60 percent, while the broad mass of coins hardly participated in the most recent rally – but what is behind the rally?
“In countries with high inflation, more and more people are turning to Bitcoin as an alternative currency. This trend can be observed especially in Africa and South America, ”explains Gil Shapira, chief strategist at eToro, which offers crypto currencies via their social trading platform. At the end of October, the accolade followed by PayPal: The payment service opens its empire to the crypto market.
Since then, US customers have been able to add Bitcoin, Ethereum, Bitcoin Cash and Litecoin to their wallets. From the beginning of 2021 it should be possible to pay with the cryptocurrencies at the 26 million sales outlets of the PayPal network. The payment service has around 350 million active customers worldwide – a gigantic market.
Bitcoin wanted as inflation protection
If you think outside the box of the crypto market, the trend towards negative interest rates cannot be overlooked. Savings assets continue to lose value in times of negative interest rates. At the same time, alternatives such as real estate and stocks have already done well. Quite a few fear a sharp rise in inflation because of the unprecedented glut of money from governments and central banks.
Bitcoin, on the other hand, is seen as protection against inflation: an algorithm limits the number of units to 21 million. The third halving, which took place in May, also had a positive effect, because it halved the range of new Bitcoins to be created.
The factor Tesla
Even professional investors are increasingly discovering Bitcoin as an admixture. Asset managers like Grayscale are seeing significant inflows and holding record stocks. Fidelity Investments recommends its customers a crypto share of the total assets of one to five percent. If only a few customers followed this advice, it would fuel the price massively. Because compared to other asset classes, Bitcoin is a flyweight with a market capitalization of around $ 330 billion. At around $ 475 billion, Tesla is worth more than all of the cryptocurrencies put together, which last raised $ 430 billion. With a stock like Tesla, everyone is aware of the risks and anticipates setbacks. This is how you should approach Bitcoin, which is significantly more volatile than Tesla due to its market environment. Big Bitcoin players, so-called whales, can drop the price by $ 1,000 or $ 2,000 with one action.
Strong fluctuations are to be expected at any time, the Bitcoin can be moved even with small sums. Corrections of 20 or 30 percent are nothing special with the digital currency, even in upward phases. In the certificates area, the issuer Vontobel has again issued matching turbo papers. But be careful – whoever joins here should have good nerves and only use so-called play money. Basically, the signal from PayPal is to be seen positively, but in the short term cryptocurrencies have run just as hot as the stock market. The old world and the new world take little away from each other right now.
Daniel Saurenz runs the stock exchange portal Feingold Research with his team. It offers a daily market letter that you can test free of charge for 14 days. Sign in at Info@feingold-research.com or try the stock exchange service under this link out. Training days and coachings can be found NEW under feingold-academy.com