Everything is accelerating in the world of Bitcoin (BTC) right now. The bullrun that began in early October 2020 took Bitcoin’s price from $ 10.5K to over $ 40K unexpectedly in the eyes of some. However, if the price of Bitcoin has gone parabolic, it is no coincidence. In this article, I suggest you come back to the 6 main reasons behind this heat stroke. Through these reasons, you will understand why we are still only at the start of something that promises to be huge in 2021.
Bitcoin broke through a new historic barrier on January 7, 2021. Only 23 days after crossing the $ 20K, then only 6 days after crossing the $ 30K, the price of Bitcoin has just crossed the $ 40K. At the rate things are going, it may well be that $ 50K are reached very quickly.
Nothing seems impossible with this Bull Run started by Bitcoin at the beginning of October 2020.
The price of Bitcoin has become totally parabolic since December 25, 2020. Every time Bitcoin crosses a new historical barrier, many believe that the top of the Bull Run has been reached. And then, at each start of correction, the demand ends up winning.
The buying pressure is such now that it seems difficult to imagine the start of the big correction in 30 to 40% which generally follows this type of Bitcoin Bull Run. Even if this correction were to take place, the price of Bitcoin would still be above $ 25K considering the price it just hit.
In order to better understand what is happening now, and why everything is different from what we were able to know during the Bull Run of 2017, I will go back to the 6 big reasons why the price of Bicoin has become parabolic.
The endless monetary inflation of the US dollar
The incredible surge in the price of Bitcoin we are experiencing today has been helped by very specific macro conditions. At the heart of the reasons why the price of Bitcoin has gone parabolic is the endless monetary inflation of the US dollar.
This monetary inflation accelerated phenomenally during the year 2020. More and more people now realize that we are facing high monetary inflation as a result of actions taken by the Fed and other central banks which have printed over $ 12 trillion from nothing in just a few months.
Central bank of the world’s largest power, the Fed blew up the amount of US dollar in circulation.
Since the establishment of the current monetary and financial system in August 1971 by Richard Nixon, the M1 Money Stock has grown steadily. Between 1975 and the beginning of March 2020, the M1 Money Stock grew from $ 273 billion to $ 4.026 billion.
Since the start of the coronavirus pandemic, the M1 Money Stock has increased by $ 3.012 billion. This represents an increase of + 75% in a few months:
This unprecedented peacetime acceleration in the increase in M1 Money Stock is having dire effects on a majority of the population. This induces a loss of purchasing power which makes poor people even poorer:
Unfortunately, the situation will not improve in the years to come.
While the fortunes of American billionaires have increased by more than $ 1 trillion since March 2020, the poorest American citizens live in even more difficult conditions. Unfortunately, this is the application of the Cantillon Effect theories of which Bitcoin is your best antidote.
To guard against the effects of this endless weakening of the US dollar, all people who can turn to safe havens in times of crisis.
Bitcoin is seen as 2.0 gold
Gold has been regarded for centuries as the best store of value. Gold has proven its worth so far. However, let’s face it: the world is changing. The world is going digital. Everything is going digital and gold does not meet the demands of this new world.
Bitcoin was created by Satoshi Nakamoto in late 2008 to restore power to the people over money.
Bitcoin’s specific properties make it an incredible store of value. Bitcoin can be thought of as version 2.0 of gold. A digital version of the precious metal with countless advantages: durability, transportability, recognizable, divisibility, greater rarity, …
Bitcoin has the advantage of being accessible to as many people as possible. The best store of value for the greatest number of people on Earth. An Internet connection and a smartphone are all you need to be able to own Bitcoin. To transport your BTC around the world, all you need is one thing: memorize the 24-word phrase that will allow you to collect your Bitcoins anywhere you end up.
The numbers speak for Bitcoin. Since its inception, the price of Bitcoin has risen from zero to over $ 40K. This phenomenal growth can be explained by the fact that more and more people have a firm belief in the success of Bitcoin. The Bitcoin revolution has taken a decisive turn in 2020, and nothing can stop it from now on.
By meeting the great need that will emerge in the years to come, Bitcoin will see its demand accelerated in an incredible way.
Monetary attributes of Bitcoin
As demand for Bitcoin will explode, the maximum Bitcoin supply will remain stuck at 21 million units no matter what. Bitcoin is a unique store of value in that its supply remains frozen even if demand continues to increase.
Best of all, the issuance of new Bitcoins keeps slowing down over time. All 210,000 blocks mined, the issuance of new Bitcoins is halved. This is part of Bitcoin’s programmatic monetary policy.
Bitcoin has a predictable and inevitable side. No one can stop this functioning of Bitcoin. Bitcoin’s unique monetary attributes make all the difference. Bitcoin technology is just used to give credibility to these monetary attributes.
This is what sets Bitcoin apart. No other cryptocurrency can compete with Bitcoin. More and more people understand this. Their reaction is instantaneous: they understand that buying Bitcoin is obvious afterwards.
At the start of last year, I still remember a great debate that animated the Bitcoin community. The big question was whether Bitcoin’s third Halving was already priced or not. This question was asked when the price of Bitcoin was around $ 9K.
At the time, I was very clear: a money creation shock such as a Bitcoin halving cannot be anticipated.
No matter how well everyone knows this is going to happen, Halving will always have a parabolic effect on the price of Bicoin. This has been confirmed once again. As always, the effects of Halving take a little time. It always begins to operate 5 to 6 months after the actual halving.
That’s what happened this time again.
The 2020 End-of-Year Bull Run started between 5 and 6 months after the third Bitcoin Halving which took place on May 11, 2020. What we are currently experiencing is only the beginning. The price of Bitcoin will go even higher by the end of 2021.
The adoption of institutional investors
Faced with the great monetary inflation that we have been experiencing since March 2020, all institutional investors have been looking for a solution to protect themselves. From the beginning of May 2020, Paul Tudor Jones announced to opt for Bitcoin rather than gold to protect himself from this great monetary inflation.
He must be given courage for having taken a public stand for Bitcoin before everyone else.
In its wake, many have ended up changing their mindset about Bitcoin. Stanley Druckenmiller dubbed Bitcoin. Ray Dalio is gradually changing his mind. Only Warren Buffett will be missing from this list. Whether or not that happens, Bitcoin will continue its revolution.
Bitcoin is eating the world, and everything is accelerating now that the gradual phase is over. Never forget what happens with disruptive technology: “Gradually, Then Suddenly”. The “Suddenly” phase has started for Bitcoin.
In addition to institutional investors who all want Bitcoin now, large companies are making Bitcoin their reserve asset. The example of Michael J. Saylor is instructive. He chose to fully opt for Bitcoin by becoming a Bitcoin Maximalist. MicroStrategy thus purchased for $ 1.125 billion in Bitcoin by following its strategy.
Barely a few months after this bold choice, MicroStrategy’s investment already represents nearly 3 billion dollars.
The fact that an online payment giant like PayPal is entering the world of Bitcoin brings credibility. Banks will also soon be offering their customers the opportunity to buy and hold Bitcoin on their behalf. It’s a certainty. JPMorgan seems to me to be the first to attempt such a bet in the United States
It would be a shame when you consider that its CEO, Jamie Dimon, had called Bitcoin a fraud in the past. Everything changed for Bitcoin in 2020. This institutional appetite protects the current Bitcoin Bull Run. Each price drop sees these new players pounce on all the BTCs put up for sale.
We are witnessing a liquidity crisis in the world of Bitcoin. It only reinforces the value of BTC in the hands of Bitcoin HODLers. The price of Bitcoin can therefore only continue to appreciate against an increasingly weaker US dollar.
Bitcoin is coming of age
Bitcoin matures after more than 12 years of existence. During the previous Bull Run at the end of 2017, the Bitcoin world was not ready to receive this influx of new entrants. In 2020, everything is ready. The main trading platforms have much more robust infrastructures.
They also have access to leading banking services. I take Gemini and Coinbase as an example, which now do business with JPMorgan.
Buying Bitcoin has never been easier than it is today at the start of 2021. You can buy Bitcoin live, and this is the best solution, but you can also do it via Bitcoin funds like that of Grayscale Investments.
Bitcoin derivatives and ETFs allow those interested in investing but fearful of volatility to get involved. This is clearly a game-changer. While the price of Bitcoin is more than twice what it was at the end of 2017, the Bitcoin network’s Mempool is not saturated.
The network is holding up. This is proof that the improvements made since then by the Bitcoin developer community are making a difference. The Bitcoin network is poised to absorb the influx of individual investors in the course of 2021.
For months, all Bitcoiners have repeatedly said that Bitcoin fundamentals are constantly strengthening. The effects of this reinforcement have been felt since the start of this Bull Run. The price of Bitcoin has gone parabolic, going above $ 40K.
A significant correction will take place at one point or another. Or maybe it will never happen since history doesn’t always repeat itself. Whatever happens, the lowest hit after this possible correction will be higher than the lowest hit in the past.
Bitcoin price will rebound strongly to increase parabolically again towards the big 2021 goal: the $ 100K. What has been going on for the past few weeks almost makes me think my goal of $ 100K at year-end has turned conservative. This is what some people keep telling me now. We will see. Until then, just one slogan: Stay strong, Stay Bitcoin HODLers.
A developer by training, I discovered Bitcoin in 2014 but did not immediately grasp the importance it could have for the world of tomorrow. I took a more in-depth look at it from the start of 2017 and I haven’t let go of it since.
Passionate about Bitcoin and the new system it is trying to build for the future, I decided to participate in its evangelization at my modest level by writing about Bitcoin, Blockchain and cryptocurrencies in different media.
It is with pleasure that I publish some of my texts in French on The Coin Tribune.
I also write quite a bit about personal development and self-improvement.
Please feel free to connect with me via social media or in comments on my articles if you have any questions regarding my articles.