The price of bitcoin may fall significantly this year after its record-breaking rise, but it is not yet clear when exactly it could happen, as the currency is still not exhausted after having skyrocketed in value, Yahoo Finance reported Saturday, citing analysts at Fundstrat Global Advisors.
Bitcoin has been breaking record after record for more than a month now, reaching its first all-time high of $29,000 per coin just at the end of the year. Experts then predicted that the cryptocurrency would soon reach the cap of $40,000, and BTC did not ruin their expectations, rising nearly 40% to the cap in less than 10 days.
But for the rest of the year, according to Fundstrat Managing Partner Tom Lee, investors should prepare for uncertainty that might hit downward with just as much pace before recovering in a possible quadrupling.
"It’s a hypervolatile asset," Lee said. "Our roadmap for risk assets this year is that stocks would be pretty explosive out of the gate and peak sometime either in late January but as late as April around S&P 4,000 before a big drawdown happens. If the S&P falls 10%, bitcoin is going to have a huge drawdown. It could be 40% to 50%."
Lee points out that in terms of bitcoin's past moves, it's been pretty much par for the course, and the same trend that suggested bitcoin's looming explosion to $40,000.
In 2017, after the last time the bitcoin reward for miners was cut in half in a systemic mechanism known as a 'halving' in 2016, the cryptocurrency rallied more than 1,200%. The latest halving occurred in May.
“That’s a pretty typical correction for crypto,” Lee said. “In fact, I think last year it had a couple of drawdowns nearly that size.”
Bitcoin fell more than 40% in just weeks in November 2019, and then in March 2020, as markets were collapsing at the beginning of the pandemic.
Even though Lee predicts a huge fall in the price, he assumes that the subsequent recovery could still push bitcoin to a yearly rise of more than 300%.
"If it looks like 2017, I think bitcoin will be up at least 300%," he said. “I don’t think it’s straight up with a ruler, it’s going to be pretty jagged but at the end of the year, bitcoin is much higher."
In December, Glassnode CTO Rafael Schultze-Kraft noted that the total amount of bitcoin on exchanges has fallen 20% in 2020.
Institutional investors and companies, like MicroStrategy, have been ploughing into the market, buying up huge quantities of bitcoin—increasing the demand, while the supply available on exchanges is shrinking massively. And this is already affecting the market.
#Bitcoin is in a supply and liquidity crisis.— Rafael Schultze-Kraft (@n3ocortex) December 21, 2020
This is extremely bullish! And highly underrated.
I believe we will see this significantly reflected in Bitcoin's price in the upcoming months.
Let's take a look at the data.
A thread 👇👇👇 pic.twitter.com/vx6rJmiloE
Economist Alex Kruger, who published a chart depicting US Federal Reserve Bank Assets over the years, has apparently suggested that investments should be made into the cryptocurrency, since it is more reliable than US dollars.
Bitcoin is backed by bits (data). Gold is backed by atoms. US dollars are backed by US treasuries & mortgage backed securities (MBS). MBS are backed by real estate. And US Treasuries are backed by the full faith and credit of the US government. Have to keep the faith. pic.twitter.com/0GOfi0aMYd— Alex Krüger (@krugermacro) January 5, 2021
Elon Musk, Tesla and SpaceX founder recently dubbed the richest man on Earth, is known for his derisive attitude toward the world's biggest cryptocurrency, and could not resist a temptation to seemingly mock the hype again in his short reply to writer Ben Mezrich, the author of Accidental Billionaires, who said he will never refuse bitcoins as payment for his work from now on.
Me neither— Elon Musk (@elonmusk) January 9, 2021
According to reports, bitcoin's current comeback is partially driven by PayPal and Square's Cash App, as they are going "crypto". The previous all-time record was hit in December 2017, with a market price of about $19,800.
The cryptocurrency reportedly constitutes around 66% of the entire global cryptocurrency market.
Bitcoin was the first cryptocurrency founded on a decentralized blockchain-based network. It was launched in early 2009, and at the moment it is considered the world's biggest cryptocurrency by market capitalization and the amount of data stored on its blockchain.
The software used to create the cryptocurrency is free for anyone willing to store their own copy of the Bitcoin blockchain on their own hardware and is accessible online. Only some 21 million bitcoins can ever be made, according to some estimates. By adding new data to the blockchain, new coins are created around every 10 minutes by bitcoin miners who manage the network.