Over the past year, Bitcoin’s price has surged and set a new all-time high of $58,332 back on February 21. But is there any buying power left in this rally?
The reward halving that takes place every 4 years usually triggers a 2-year bull run. Historically, the second year of the rally has returned hundreds of percent in gains on average.
Also, the percentage of investors who actually hold an entire Bitcoin is very small but Bitcoin investors, who own 1,000 Bitcoin or more, so called “Bitcoin Whales”, account for 42.56% of total supply. In the past, when the Whales have controlled 43% or more of the cryptocurrency’s supply, its price has taken off.
On top of that, we’re potentially facing a major squeeze because the current crypto market is very different from what it was four years ago. Crypto miners, like Bit Digital (Nasdaq: BTBT), Hive Blockchain Technologies (OTC: HVBTF), Marathon Digital (Nasdaq: MARA), Riot Blockchain (Nasdaq: RIOT) and others, are now recognized as real businesses and investment opportunities. At the same time, large buyers, like Goldman Sachs (NYSE: GS), Grayscale Bitcoin Trust (OTC: GBTC), MicroStrategy (Nasdaq: MSTR), Tesla (Nasdaq: TSLA) and dozens of others, are pouring billions of dollars into Bitcoin. This was unheard of in years past. This is creating a situation where the Bitcoin liquid supply change is negative. And it’s been negative for much of the past year. This means demand for Bitcoin is outstripping supply. This is a perfect storm for any asset to rally, let alone a digital currency that has a limited supply of 21 million. A similar setup to this in 2016, the previous reward halving before the one in May 2020, helped to fuel a massive rally all the way into 2018. Right now, there are roughly 4 million Bitcoin in constant circulation. That’s essentially all there is for buying, selling and trading. The cryptocurrency’s total supply today is 18.65 million. So as more institutional and retail investors push into Bitcoin, there’s exceeding pressure on the available supply in circulation.
Institutions are buying Bitcoin faster than it can be mined. Coinbase and other reputable exchanges are the preferred platforms for institutions to buy and sell Bitcoin because Coinbase allows Bitcoin only from parties that are fully vetted. These are clean coins, so they do not come from hackers, ransomware, theft or other dark web markets. In turn, institutional buyers bid up the price of vetted, clean coins, which drives up the price of Bitcoin across the board.
All of this above is creating the perfect storm for Bitcoin’s rally to continue. As Bitcoin sets new highs, receives more media attention and draws in new investors, Bitcoin’s bull run will gain steam. So, $100,000 for the price of 1 Bitcoin does not sound unrealistic and I can see this price target reached very soon.
Sven Franssen