The CEO of Pantera Capital thinks that a ‘Bitcoin shortage’ is responsible for the recent price action. Dan Morehead alleges that interest from major institutions is making Bitcoin (BTC) attractive which is also making it get purchased faster than it can be mined.
Morehead said that the price move that pushed BTC above $20,000 is entirely different compared to the one that took the crypto asset to its previous all-time high in 2017.
The ‘Bitcoin Shortage’
Q4 2020 has enjoyed a strong return of bullish sentiment to the bitcoin market. Trading at around $10,300 just three months ago on September 22, the BTC price has surged dramatically. The flagship crypto reached a new all-time high at the start of December and since December 16, bitcoin has not dipped below $22,000.
Pantera Capital’s Dan Morehead while speaking on CNBC on December 22 said that the price-performance arose from a ‘Bitcoin shortage’. PayPal together with several other major companies is acquiring bitcoin faster than the miners are mining it which has resulted in the ‘price to squeeze up.’ CNBC (@CNBC) tweeted on December 22, 2020:
“There’s a “bitcoin shortage” due to big institutional buyers like Paypal purchasing more than 100% of newly-created currency, cryptocurrency expert Dan Morehead says.”
There's a "bitcoin shortage" due to big institutional buyers like Paypal purchasing more than 100% of newly-created currency, cryptocurrency expert Dan Morehead says. https://t.co/qtI233fzM0 pic.twitter.com/H8mPoScAAh
— CNBC (@CNBC) December 22, 2020
According to previous reports, many major firms have been acquiring huge quantities of BTC in recent weeks. Some companies like Grayscale and PayPal are absorbing BTC to offer exposure to the cryptocurrency to their users.
In the meantime, other firms including MicroStrategy and Square have added Bitcoin to their growing treasury reserves. Those who are doing that frequently cite some growing macroeconomic uncertainty as the driving force behind that decision.
Furthermore, several of the most famous traders and investors in the world, including Paul Tudor Jones, have turned bullish on BTC in 2020. Maybe more surprising are the likes of Citibank and JPMorgan that now advocate for a BTC allocation.
Major buying pressure is coming from public firms, macro investors, and large endowments. Morehead said that the current rally is quite different from that which culminated in 2017. He added that the price reached the former all-time high on speculation only. Now, the entities that are driving the price up are buying bitcoin on a 5-to-20 year timeframe.
Utility Versus Risk
Despite the market conditions that have resulted in the shortage of Bitcoin available, Morehead acknowledges that there are some risks involved. When asked on possible bearish developments, like the Ledger data breach, the SEC actions against Ripple, and a possible clampdown on non-custodial wallets, he commented:
“It’s very, very early days for a brand new asset class so there’s going to be volatility on both sides.”
But, the Pantera Chief believes that the media is less likely to report on the increasing numbers of people throughout the world that find bitcoin useful. He added that it is this growing adoption that is driving the price in the face of the expected risk.
Morehead mentioned that international remittances and those investors who choose to store their wealth in Bitcoin as being the most important use cases. In conclusion, he said, when the price of bitcoin was about $200 in 2014, almost a million people were using the network.
Today, in December 2020, the price is consolidating above $20,000, and over one hundred million people find bitcoin useful. How high will bitcoin go in the coming years?