In today’s Money Morning…the case for a US$318,000 bitcoin…why the bitcoin boom matters, even if you don’t own it…you ain’t seen nothing yet…and more…
2017 will always be a year to remember for crypto enthusiasts. A period where Bitcoin [BTC] truly had its first mainstream breakout.
Sure, bitcoin had made headlines before then, but not in the same fashion. It was always relegated as a fringe story, something that most people could gawk at but brush aside.
The mania that we saw three years ago though, was different.
As bitcoin surged to its all-time high of US$19,783.06 on 17 December, people were buying in like mad. Fear of missing out drove a frenzy of everyday investors to finally dip their toes into the world of cryptocurrency.
Today, we now know how that turned out…
Many of these late investors ended up getting burned. Getting their first taste of the vicious volatility that cryptos are infamous for. I’m sure many will never invest in crypto again because of it.
Which is a shame, because those that are familiar with bitcoin’s history know better. They have seen or even experienced the long ‘crypto winters’ before. Periods of stubbornly low trading and gains.
But, the most important factor is that these winters always come to an end. And when they do, bitcoin runs hot.
The case for a US$318,000 bitcoin
If you haven’t already heard, bitcoin has been on a tear lately.
In fact, it’s been on a tear for most of 2020. It’s just that the media has only started giving it attention again now that it is closing in on its previous all-time high.
Overnight bitcoin briefly breached the US$18,000 mark for the first time since 2017. Rising just over 15% in the past week alone. Putting it within an arm’s reach of potentially hitting US$20,000 for the first time ever.
Some analysts though, are looking much further than that…
The crypto Twitterverse has been buzzing after a Citi Bank FX report was recently leaked. A document that was intended for ‘institutional clients’ only.
Without going into all the details, this report was all about bitcoin. Comparing the budding crypto to gold — as many have done so in the past.
But, this report went much further than most, using historical gold price action and other technical analysis to predict bitcoin’s trajectory. Here is the big takeaway though:
‘You look at price action being much more symmetrical over the past 7 years or so (while still huge numbers) forming what looks like a very well defined channel giving us an up move similar timeframe to the last rally.
‘Such an argument would suggest that this move could potentially peak in December 2021, at the high of the channel, suggesting a move as high as [US]$318k. Improbable though that seems it would only be a low to high rally of 102 times (the weakest rally so far in percentage terms) at a point where the arguments in favour of Bitcoin could well be at their most persuasive ever.’
Now, I’ll be honest. I do tend to lean to the improbable line of reasoning here.
As much as I am a bitcoin bull, I think US$318,000 by the end of next year is a bit of a stretch. Especially because I am also sceptical of the validity of technical analysis when it comes to crypto. They are far more volatile and unpredictable than your typical asset.
I’m more than happy to be proven wrong though. Because I’m certainly not disputing the fact that bitcoin is going mainstream once more.
Why the bitcoin boom matters, even if you don’t own it
Wild predictions aside, the case for bitcoin — and crypto at large — is only growing.
You need only look at the state of fiat currency and the enthusiasm for gold to see that. With bitcoin and crypto offering a new hedge against the implosion of the monetary system. Not to mention a far more viable alternative than returning to a gold-backed currency.
Plus, the technology behind crypto — blockchain — is constantly being iterated upon. Even attracting the attention of central bankers, the World Bank, and the IMF.
Even the recent Biden election win has exciting potential for crypto. Gary Gensler, the newly appointed Professor of Blockchain, Digital Currency, Financial Technology, and Public Policy at MIT is in charge of the US government financial policy transition team.
Meaning, he will be in charge of reviewing the Fed as well as banking and security regulators. A position that could influence the US’ stance towards cryptocurrency. After all, Gensler is well versed on the topic.
But I digress.
The point I want you to take away from all of this is that bitcoin is in the spotlight once more. Because even if Citi Bank’s prediction is wrong, or Gensler doesn’t convince Biden to embrace crypto, or any other ongoing development doesn’t pan out; the fact that people are talking about it at all is what matters.
Each and every time bitcoin makes headlines it becomes a little more accepted. Gradually changing more people’s attitudes and understandings of the cryptocurrency agenda as a whole.
At the end of the day, bitcoin’s true benefits aren’t its speculative returns. As impressive as they have been and may continue to be.
No, the real goal is to fundamentally change our view on money. Something that is happening right now.
So, even if you have no plans to ever ‘invest’ in cryptocurrency, you may one day end up using it. Whether it be bitcoin, Ethereum [ETH], or even a digital version of the Aussie dollar.
Either way, there is no stopping the change that is coming. And if you thought the buck stopped at bitcoin, well, you ain’t seen nothing yet.
Tune in tomorrow as I unravel the far crazier world of Decentralised Finance, or DeFi for short.
Editor, Money Morning
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.