When will Bitcoin hit 5 million each
In 2020, various crypto currencies showed a strong price performance. Bitcoin, the largest cryptocurrency in terms of market capitalization, has grown by around 150 percent since the beginning of the year. Skeptics are already talking of a new price bubble.
But the current rally is likely to be a lot more sustainable than this one in 2017. The entire market for crypto assets has become highly professional in the last two years. The regulators have also defined the first framework conditions, with Switzerland at the forefront. For mass adaptation, banks have to start with or support crypto services. The USA is taking the first steps towards this. A new proposed rule by the US Financial Services Authority stipulates that banks will be able to judge crypto firms based on licensing and compliance performance in the future (see press release).
But there are a number of other developments that indicate that Bitcoin & Co. is taking big steps towards the mainstream. The reasons:
A major criticism of Bitcoin is its high volatility. Although this is higher compared to many traditional asset classes, it has decreased over the past few years.
Meanwhile, some stocks, such as Tesla, have also outperformed Bitcoin's volatility. This shows, among other things, a study by the US financial services provider VanEck that some values from the S&P 500 were more volatile than Bitcoin during the period under review.
In her volatility study, VanEck compared the volatility of Bitcoin over 90 days and since the beginning of the year with the components of the S&P 500 Index (measured by the daily standard deviation). The analysts come to the conclusion that Bitcoin has a lower volatility within 90 days than 112 shares of the S&P 500, or 145 shares since the beginning of the year.
Bitcoin as a cash reserve
In late summer, the headline of Microstrategy, a listed US software company, caused a stir: the company invested a large part of its cash reserve in Bitcoin. In total, the company bought 38,250 bitcoins in the third quarter of 2020. At the end of September these were valued at $ 380 million on the balance sheet. In the meantime, the value as of November 20, 2020 has risen to almost 700 million.
Excerpt from Microstrategy balance sheet as of September 30, 2020But Microstrategy isn't the only company investing reserves in Bitcoin. At the beginning of October, the US payment service Square also announced that they had invested $ 50 million in Bitcoins.
According to Bitcointreasury, 4.5 percent of all Bitcoins are now held by companies, which at a Bitcoin rate of 18,250 (as of November 20, 2020) corresponds to a total value of around 15 billion dollars (overview).
Millennials drive the Bitcoin
Generations Y and Z are another driver. The generation born after 1980 finds Bitcoin attractive and is what drives the price. This generation grew up with smartphones, Google and Co. For this age group, Bitcoin is not an exotic financial instrument, but simply a digital currency. But there are other reasons why millennials are further accelerating the adoption of Bitcoin: Since they are furthest away from retirement, they can take greater risks and they have also experienced the financial and real estate crisis and in some cases lost their trust in the financial system.
Established economists also see millennials as a buyer. “Bitcoin is 'here to stay' thanks to huge demand from millennials,” Rick Rieder, Chief Investment Officer of the world's largest wealth manager Blackrock, recently told CNBC.
For a long time, buying and selling bitcoins was rather difficult for many users. Interested parties had to deal with private and public keys, download a wallet, think about safe storage and were often overwhelmed with the purchase and process via a crypto exchange. But there are now some finance apps that have included crypto currencies in their offerings.
Since 2017, for example, Revolut's 14 million users have been able to buy and sell bitcoins directly in the app. The US payment service Cashapp also offers Bitcoin trading, and with great success. In 2020 the numbers really exploded, as the interim report of the parent company Square shows at the end of September 2020: In the period from September 2019 to September 2020, sales rose from 338 million to 2.8 billion dollars.
Excerpt from Square's income statement as of 9/30/2020
PayPal also wants to make Bitcoin and other crypto currencies accessible to its users via its app. The potential is huge, because PayPal has around 325 million active users. This increases the visibility of Bitcoin & Co. further.
Bitcoin = Gold 2.0
More and more investors are realizing that Bitcoin can also be viewed as Gold 2.0. There are also various reasons that speak for it. The main argument is of course the scarcity. In contrast to gold, with the mother of all cryptocurrencies you know exactly how many bitcoins (21 million) and when the last bitcoin (in 2140) will be mined.
In addition, Bitcoin's deflationary properties speak for itself. These make the cryptocurrency a hedge against rising inflation. Another argument is fungibility. Bitcoin can be transferred more easily and practically than conventional gold.
For many professional as well as very wealthy investors, Bitcoin is now part of their asset allocation. Just recently, the second richest man in Mexico and the 166th richest man in the world, Ricardo Salinas Pliego, said that he had invested ten percent of his portfolio in Bitcoin (see tweet).
Hoy les recomiendo EL PATRÓN BITCOIN, este libro es el mejor y más importante para entender #Bitcoin.
El Bitcoin protege al ciudadano de la expropiación gubernamental.
Muchas personas me preguntan si tengo bitcoins, SÍ. Tengo el 10% de mi portafolio líquido invertido en el 😌💵 pic.twitter.com/6LtFVCXvuA
- Ricardo Salinas Pliego (@RicardoBSalinas) November 17, 2020
There are still many arguments in favor of Bitcoin and also arguments against the mother of all cryptocurrencies. But the trend that Bitcoin is finding its way into the masses is hardly noticeable, will continue to increase and can hardly be stopped. Even if the share price falls sharply, which is possible at any time, companies and professional investors will probably continue to operate in the market - maybe even buy. And new investors would possibly use a price slide to get started.
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Bitcoin in the mainstream? Rino Borini explains on Fintool.
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