Bitcoin exchange rate (BTC) cracked the impressive $ 40,000 mark on Thursday, January 7, 2021, at 7:20 p.m. It didn’t take a week for the price to jump from $ 30,000 to $ 40,000. A pace that can legitimately be frightening. Why the correction has not materialized so far and how the exponential price growth can be explained.
On Thursday morning, it was not Bitcoin but the overall market that was in focus. The total market capitalization of all cryptocurrencies has broken the impressive mark of one trillion US dollars — in numbers 1,000,000,000,000. Since midday, however, the Bitcoin rate has also set a new record. For example, the BTC rate is up over 13 percent over a 24-hour period. On a weekly basis, it is even more than 38 percent. With the exception of the cryptocurrency XRP, there is no coin with a larger daily plus among the top 20 cryptocurrencies.
Bitcoin’s market cap itself is $ 720 billion. This corresponds to a Bitcoin dominance compared to the Altcoins of around 69 percent.
As you can see, the pendulum swings all the way to the right. The result: extreme greed. However, this greed is mainly driven by large investors and not by private investors. All of Voyager Digital’s crypto asset managers through Galaxy Digital announce record reports in assets under management. The crypto exchanges are downright being bought short by institutional investors. This can also be seen in the OTC volumes such as Coinbase Pro, where billions in Bitcoin are purchased every day.
The sell-off of Bitcoin, which is still freely tradable, is being driven by investment companies such as VanECK, Coinshares, or ETC Group, who purchase Bitcoin in order to use it as an underlying for their financial products.
If you consider that these are only bonds such as ETNs and not ETFs, the situation shows how dramatic the shortage of Bitcoin is. Bitcoin stocks on the exchanges are melting away and being diverted into the traditional financial world. It is currently unlikely that this trend will reverse. After all, only very few institutional investors are invested in Bitcoin. Many insurance companies, hedge funds, and family offices are only just getting started. If only a few percent or basis points of the managed funds are diverted into Bitcoin, then this should also enable prices well above 40,000 US dollars in the near future.
With the trend of large assets being liquidated in order to allocate a part in Bitcoin, the exponential growth shows that the market is overheating. From a certain point onwards, profit-taking will lead to a major correction without permanently damaging the rising trend of Bitcoin. This means that the likelihood of a sharp Bitcoin correction is very high and continues to increase every day, but at the same time, there are no fundamental reasons why the bull market should come to an end. This tendency is also shown by the increased volatility in the Bitcoin price:
So you can clearly see that the 30- and 60-day volatility of Bitcoin has increased significantly. The swings up and down have reached a higher level than in the months before.
The money printing orgies of the central banks and the simultaneously growing understanding that Bitcoin, as digital gold, offers protection against loss of purchasing power, provide sound arguments for further rising prices. It is now completely normal for large financial institutions to dare to make Bitcoin price predictions that only crypto hardliners could have imagined a year ago. If Nikolaos Panigirtzoglou , Managing Director at the banking giant JPMorgan, has his way, the end of the flagpole is unlikely to be reached yet. His long-term goal: A Bitcoin course at $ 146,000.
If you look at the investor demand and the crypto market entry of corporations like PayPal, then 6-digit price forecasts seem absolutely realistic. Especially since one must not forget here that there is still hardly any real economic inflation. So far, it has primarily been asset inflation that has caused asset classes to rise. If prices in the real economy should also rise, then this should give the world’s scarcest asset another powerful boost.