Once strongly criticized and mocked, Bitcoin is now accepted and even adored. While its market dominance within the crypto sphere has decreased in recent years, Bitcoin is still the most popular alternative investment vehicle for both retail and institutional investors. Bitcoin’s strong price fluctuations mostly depict the changes in attitude that major financial institutions have towards it.
According to Millionaire Trader Matt Monaco, “crypto’s going mainstream! Big companies and banks once fought it. Now many are working to integrate it into their platforms and portfolios. Think PayPal, JP Morgan Chase, Citibank, and many more”. With more and more companies wanting to use or accept Bitcoin, and more and more professionals wanting to invest in the token, its credibility is strengthening, attracting even more people.
This is one of the main reasons why Bitcoin’s price has surged in the last few years to recently reach a new all-time high above $68,000. There are, of course, other reasons for the rise of the number one cryptocurrency on the market – inflation pressures in major economies like the United States being one of them.
Recently, inflation in the US reached its highest level in 3 decades. According to the latest figures published by the Labor Department, the Consumer Price Index (CPI) was up 6.2% year over year for the month of October. This news is seen as positive for Bitcoin and the crypto-market for different reasons – one of them being that many crypto-traders and investors consider Bitcoin a hedge against rising prices. Traders are looking for investment options that are able to provide returns that can compensate for this rise in price, with higher returns than classic products like cash, bonds, and other fixed income products.
Investors are also trying to figure out what this figure means for policymakers. How quickly are they going to react to inflation higher than their 2% target? When will the buying program stop? When will interest rates rise? So far, officials have declared that this inflation is “transitory”, but they have also shown hints that growth prospects are positive and strong enough to start increasing rates and taper off their monetary stimulus from next year.
Since last year, the positive correlation between the speed of money creation and the markets, including the cryptocurrency market, has strengthened. Like most financial assets, Bitcoin rose along with the strong monetary support provided by major economies to fight the consequences of Covid-19 on global growth. And while some investors are worried that the Fed tapering off its stimulus program might be negative for Bitcoin and the cryptocurrency market, others believe that this factor has already been priced in. Still, recent news about US inflation and monetary policy adjustments seems to have an impact on Bitcoin.
The approval of an ETF on Bitcoin in the United States has also recently supported the price of the coin, as it could allow sophisticated investors to invest in the token without having to buy, own, and secure them. This investment vehicle will help them respect compliance rules they have to follow as professional investors, which might attract new kinds of institutional investors.
Despite huge gains this year, Bitcoin’s price keeps rising and many wonder where Bitcoin will stop. Many important investors and people in the industry see Bitcoin at $100,000 before the end of 2021, such as CoinList CEO, Graham Jenkin, BitMEX CEO, Alexander Hoptner, as well as some cryptocurrency research teams in big banks like Standard Chartered.
