Even long-time Bitcoin investors have not yet experienced such a situation. The Bitcoin price climbs to a new all-time high every day. The last record was taken this morning at 8 a.m. when the Bitcoin price broke the 34,000 US dollar mark. Measured against the current rate of price increase, it is impossible to estimate where the price will end up in the next few hours. The first side effects of the historic Bitcoin rally are not long in coming.
Yesterday morning the Bitcoin price was still below $ 30,000. Just one day later, we are targeting the US $ 35,000 mark with currently US $ 34,500. When looking at the annual chart, the increase in the Bitcoin rate looks more and more like an exponential function.
With this huge surge, it is important to realize that it means an increase in Bitcoin market capitalization of around $ 100 billion. Overnight, the GDP of a small state was added to the market capitalization of Bitcoin.
Such a sharp increase in the Bitcoin price always puts a strain on the ecosystem. Even during the crypto hype at the end of 2017, crypto exchanges, among other things, came up against their load capacities and there were failures. Although the ecosystem of service providers has developed and improved significantly since then, current crypto service providers seem to be faced with the first failures.
As already explained yesterday by the Bitcoin Fear and Greed Index, the sentiment reached also a record high for greed. The mood is maximally heated. From historical experience a warning signal for every investor that the probability of a correction increases.
The fear of missing out on something (FOMO — Fear of Missing out) is now spreading not only among private investors but also among institutional investors. There is a real build-up of both groups of investors. At the same time, the rapidly increasing shortage of Bitcoin is increasing the price pressure on the Bitcoin exchange rate. More and more Bitcoin is being withdrawn from the market by investors with a long-term holding horizon. This has given the shortage a strong momentum in the last few days.
The Bitcoin price explosion also affects the rest of the market. Other cryptocurrencies are rising in the slipstream of Bitcoin. The Dogecoin course (DOGE) is particularly eye-catching. The Dogecoin was one of the first cryptocurrencies and was created as a “fun crypto currency” with no deeper meaning or purpose. The fact that a cryptocurrency like DOGE is also rallying rapidly should also be interpreted as a warning signal.
In a hype phase, not only do substantial assets such as Bitcoin or Ether increase but also projects such as DOGE. As the weekly chart shows, the cryptocurrency has gained over 170 percent.
The fact that the Bitcoin price is currently over 34,000 US dollars is also justified from a fundamental point of view. A rapid price increase is also understandable in terms of necessary catch-up effects. However, the speed of the price increase is to be viewed with concern. We are in a state of overheating which, like every hot summer phase, has to discharge with a thunderstorm. So you should always expect profit-taking and corrections that can drop the Bitcoin price by 20 percent and more in just as short a time.
However, this does not change anything in terms of the outstanding perspective. The Bitcoin price is in a bull scenario that should bring with it many new all-time highs in 2021, well above $ 40,000 and above. However, breaks are necessary in between. Every investor should be aware of this.