After waiting for three long years, Bitcoin is back at the top of the game. However, this time everything is entirely different. On November 30, bitcoin broke its all-time high of $19,783, overcoming its record set in the 2017 bull run. Since then, the crypto has dropped to trade between $19,300 and $19,500.
However, the flagship crypto is still volatile and it is sometimes changing by hundreds of dollars in short periods. While bitcoin has gained 170% since the start of 2020, the bull run seemingly gained momentum in August. At that time, a series of high-profile bitcoin investments were made. These investments, led by business intelligence firm MicroStrategy, pushed bitcoin to record-breaking heights.
Jason Deane, the Bitcoin analyst at Quantum Economics, said:
“Broadly speaking, institutional positions and high-net-worth individuals are leading the way this time and the Bitcoin they purchase is much more likely to be held long term rather than find its way back to the exchange.”
The available figures back the theory extensively. Since MicroStrategy dived into bitcoin, many other indicators, besides the price, have soared. Bitcoin’s price increased from $7,182 to $11,850 between January 1 and August 10 which marked a gain of 65% in ten months.
Since August 11, after MicroStrategy started investing in the bitcoin market, the price increased by 65% yet again. The second phase of the bull cycle took just three and a half months and has seen the flagship crypto break its previous high of $19,665.
In the same three months, bitcoin’s market capitalization surged by 64% from $216 billion to $356 billion. Since August, the crypto’s trading volume has also doubled, surging from $23 billion to $48 billion. These factors show that bitcoin has captured the interest of the global investment market since its bull run started.
What role did the big investors play in the record-breaking success?
Institutional Investors Praise Bitcoin
On August 11, 2020, institutional investments started when MicroStrategy invested around $250 million in the crypto. Almost a month later on September 8, 2020, that amount was increased to about $425 million. Exactly a month later on October 8, Square came in investing $50 million which translates to 1% of the firm’s total assets.
PayPal also joined the bitcoin field a few weeks ago. On October 21, the payments behemoth said that it would be offering payment support for many cryptos including bitcoin. A month later, PayPal had allegedly acquired 70% of the bitcoin that had been mined in the previous 30 days.
However, all these figures tell half the story. Maybe what mattered most to Bitcoin’s meteoric surge was that it was accompanied by these investments from notable companies. While announcing its first investment in bitcoin on August 11, MicroStrategy said:
“Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it.”
Michael Saylor, the company’s CEO has also become a loud and outspoken bitcoin advocate since the investment.
#Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy.
— Michael Saylor (@michael_saylor) September 18, 2020
Additionally, Square’s chief financial officer at the time of the firm’s investment, Amrita Ahuja, stated:
“We believe that Bitcoin has the potential to be a more ubiquitous currency in the future. For a company that is building products based on a more inclusive future, this investment is a step on that journey.”
But the statements only take us to October. At the time of Square’s investment in BTC, the price was at around $10,800, almost $9,100 away from the current all-time high. Jack Dorsey’s company Square recently invested $50M in BTC.
Fast forward to November 9, when billionaire investor Stanley Druckenmiller; the person that managed George Soros’ money in the 1990s; publicly acknowledged that bitcoin was better than gold. Druckenmiller said on CNBC:
“It could be an asset class that has a lot of attraction as a store of value to both Millennials and the new West Coast money—and as you know they’ve got a lot of it.”
BTC’s price has somewhat taken notice of the praise. Bitcoin price opened the day on November 9 around $15,479. Barely four days later, the $16,000 level was breached as BTC surged to $16,463.
Around a week ago, Rick Rieder, BlackRock CIO, also commented about Bitcoin’s ability to replace gold. He stated:
“Do I think it’s a durable mechanism, do I think it will take the place of gold to a large extent? Yeah, I do, because it’s so much more functional than passing a bar of gold around.”
Other commentators have also been commenting on gold’s recent decline, and taking more notice of Bitcoin.
A few days ago, PayPal’s CEO Dan Schulman similarly commented:
“I think [digital currencies] start to move from being less of just an asset class and more into a currency. And when you start to move crypto as a potential funding instrument, I think that bolsters its utility, and stabilizes it as well.”
Public praise is good for bitcoin, but it is not the only factor that has contributed to the current all-time high.
Binance Research says that several factors account for bitcoin’s price surge. First, BTC is thought to act as a hedge against inflation. Thus, as governments continue to offer economic relief amidst the COVID-19 pandemic, the value of fiat currencies may continue to drop as a result of inflation.
In that context, there has been an integral point to haven assets, including bitcoin.
“This flight into safe-haven assets seems to be on its way.”
Binance Research observed that BTC has produced year-to-date returns of about 248%.
Furthermore, bitcoin’s bull run has benefited from some of the under-the-radar influences including increased regulatory scrutiny, a growing futures market, and streamlined access to the crypto not witnessed in the 2017 bull run. Binance Research added:
“Over the last three years, an increasing regulatory certainty enabled the entrance of licensed custodians, which are now at the center of a prime brokerage industry and are crucial in enabling companies to hold Bitcoin.”
The bitcoin market is quite different currently compared to how it was three years ago.
What Does Bitcoin’s Success Mean For General Crypto Market
Historically, when bitcoin surges, the altcoin market has followed. In December 2017 when bitcoin reached near $20,000 during its all-time high, many crypto competitors went on bull runs of their own.
Ethereum and XRP surged in the 2017 bull run that was spearheaded by bitcoin. XRP shot up from $0.25 on December 4, 2017, to reach a high of $3.75 on January 4, 2018. Also, Ethereum exploded from $440 on December 1, 2017, to reach $1,347 on January 13, 2018.
Up to today, both XRP and Ethereum have followed Bitcoin’s price action and they are on the current bull run as well. Ehtereum has surpassed the $600 level for the first time in almost three years. The price is still rising after recording a 25% gain in the past seven days.
On its part, XRP has seen a spike of its own exploding from around $0.60 to just under $1 on November 24, 2020.
Now that bitcoin seems to be approaching uncharted territory, there is no telling what will happen next until it happens.