The price of Bitcoin just hit $20,000 for the first time ever in a
historic milestone for the world’s most popular cryptocurrency.
The price of Bitcoin (BTC) has reached $20,000 for the first time in history on Dec. 16. The historic milestone comes just over two weeks after breaking its previous all-time high.
At
the same time, this rally is different from 2017’s due to several
reasons that could help BTC soar even higher. These include growing
institutional demand, the increasing perception among investors that BTC
is a store of value, and stronger network fundamentals.
Institutional demand is fueling the Bitcoin rally
In
December 2017, data suggested that retail and mainstream investors were
behind the Bitcoin rally. At the time, CME BTC futures had just
launched and there was a lack of institutional investment vehicles.
As such, the rally was mostly fueled by retail investors, which came to an abrupt stop after a strong whale-induced sell-off.
This
time, institutional investor-focused platforms are seeing an explosive
increase in trading activity. For instance, the CME BTC futures market
recently notched a $1.27 billion open interest, ranking just behind OKEx as the second-largest in the global Bitcoin market.
Institutional
investors are not likely to invest in Bitcoin with a short-term
strategy. Many are increasingly viewing it as a digital store of value
and an alternative to gold.
As Cointelegraph reported earlier,
the rise in Grayscale’s Bitcoin Trust premium suggests that
institutions are increasingly looking for exposure to BTC and paying
above the spot market price for the privilege.
BTC is increasingly viewed as a store of value
Both institutions and high-net-worth investors are starting to acknowledge Bitcoin as a store of value and as a treasury asset.
MicroStrategy, the publicly-listed company in the United States that purchased $450 million worth of BTC earlier this year, sparked a trend that has led other institutions to allocate their capital into Bitcoin.
The
perception of BTC as a hedge against inflation and a stable store of
value could make BTC compelling for the broader financial sector in the
medium to long term. Michael Saylor, the CEO of MicroStrategy, said:
“Bitcoin
is the world’s best treasury reserve asset and the emerging dominant
monetary network. It is the solution to the store of value problem faced
by every individual, corporation, and government on earth. As this news
gets out, the world is going to change for the better.”
At
the same time, Bitcoin’s performance has dwarfed gold’s this year once
again as well as the S&P500’s, despite the precious metal and the
latter breaking their own all-time highs this year.
Hence,
it is no surprise that Wall Street is now taking Bitcoin more seriously
than in 2017. Further evidence of this was revealed on Dec. 3, when the
S&P 500 announced its plans to roll out its own cryptocurrency indexes next year.
Bitcoin’s fundamentals are stronger than ever
As Cointelegraph reported,
Bitcoin’s fundamentals are stronger than ever as the network is now
moving $500,000 per second around the globe. In other words, Bitcoin
transfers $4.627 billion in value per day.
The network is also ten times more secure than in late 2017, as the hash rate and mining difficulty both continue to hit new highs this year.
The hash rate indicates how much computing power is being dedicated to
validating Bitcoin transactions and securing the network.
source link : https://cointelegraph.com/news/bitcoin-price-hits-20-000-for-the-first-time-in-history
