One coin = a down payment? Bitcoin goes crazy again, rising above $60,000!

After nearly a month, the price of Bitcoin soared again by $10,000.

Starting from the evening of March 13, the price of Bitcoin rose in the short term, and after breaking through the $59,000 mark, it quickly reached $60,000, with the highest price reaching $61,519.57 (approximately RMB 400,000).

As of press time, the price of Bitcoin has fallen back to $60,743.04 (about RMB 395,000), up 6.20% in 24 hours, with a trading volume of $66.65 billion and a market value of about $1.13 trillion. On February 16, the price of Bitcoin exceeded $50,000.

Bitcoin price trend within a day Image source: coindesk

Will the US's $1.9 trillion stimulus plan push up Bitcoin?

It is worth noting that the effects of economic growth and rising inflationary pressures brought about by the US’s $1.9 trillion fiscal stimulus plan are stimulating investors to continue chasing the rise of Bitcoin.

According to The Paper, Xu Tong, a senior analyst at Huobi Research Institute, said that one of the reasons for the rise was that the United States passed a $1.9 trillion stimulus bill.

"A new round of money supply has begun, and investors' concerns about the tightening of the monetary environment caused by previous inflation have been resolved. Previously, Bitcoin experienced a sharp correction, which means that the market is still pessimistic about the continued inflation. The current policy has been implemented, and the previous excessive decline has been corrected."

On March 12, US President Biden signed the $1.9 trillion COVID-19 relief bill, the American Rescue Plan, marking the official entry into force of the bill. The plan includes direct relief to US residents, extended unemployment insurance, and subsidies to state and local governments.

The OECD's medium-term economic outlook report released on March 9 significantly raised expectations for U.S. economic growth. The report predicts that the U.S. economic growth rate will be 6.5% in 2021 (the forecast value in December last year was 3.2%) and 4.0% in 2022 (the forecast value in December last year was 3.5%).

Image source: Photo Network

Bitcoin generally shows a fluctuating upward trend. From the end of 2020 to the beginning of 2021, Bitcoin quickly broke through $40,000 from below $20,000, then fell back to $30,000, and then "crazily soared" to $58,000, and then experienced a second correction to around $45,000, and this time it rose again to more than $60,000.

According to 21st Century Business Herald, several people from crypto digital asset exchanges believe that although the price of Bitcoin continues to rise, investors need to pay close attention to the high volatility risk of Bitcoin prices. Over the past month, Bitcoin has repeatedly experienced a sharp correction after reaching new highs, causing many high-leverage investors to be at risk of liquidation. In addition, investors also need to pay close attention to the possible price manipulation risks of Bitcoin - due to the low liquidity of Bitcoin, any large Bitcoin holder who suddenly sells their positions to make a profit and leaves the market will trigger a sharp and volatile decline in Bitcoin in a short period of time.

The surge was preceded by a sharp drop the day before

Examples of Bitcoin's sharp decline in a short period of time are not uncommon. On March 12, the price of Bitcoin continued to rise, breaking through the $58,000 mark in the short term, just one step away from setting a new record high. However, at around 9 o'clock that night, the price of Bitcoin suddenly collapsed, breaking through the three major barriers of $58,000, $57,000, and $56,000, falling by more than $3,000 in two hours, and the lowest price was $55,088.

The sharp drop in the price of Bitcoin has caused a lot of grief among the longs in the futures contract market. The longs in the futures contract market did not expect that the market would be so good during the day on the 12th, but there would be a bloodbath in the evening. UAlCoin data shows that the virtual currency contracts had a total liquidation of more than 5.2 billion yuan in one day on the 12th, and more than 20,000 longs were brutally wiped out.

The sharp drop in Bitcoin on the evening of the 12th may be related to the news that a well-known trading platform was being investigated.

That night, media reported that the U.S. Commodity Futures Trading Commission (CFTC) was investigating Binance, a virtual currency trading platform, to see if the company allowed U.S. residents to illegally trade derivatives it regulates. Currently, the Weibo account covers of Huobi and Ouyi show that the accounts are no longer viewable due to complaints of violating laws and regulations and relevant provisions of the Weibo Community Convention. Many investors regard these signals as the fuse for the recent Bitcoin pullback, saying: "The moment of panic in the currency circle has come again" and "the policy tendency is already obvious."

Institutions are joining in

Recently, well-known companies including Tesla, Square, and Microstrategy have been purchasing Bitcoin.

On Sunday, Meitu became the latest company to join the camp. According to a March 7 announcement, the company spent $40 million on March 5 to purchase 15,000 units of Ethereum and 379.1214267 units of Bitcoin.

According to China Business News, Anthony Pompliano, co-founder and partner of Morgan Creek Digital Assets, said that central banks around the world have been easing monetary policy. "Trillions of dollars have been injected into the market. Everyone from individuals to financial institutions to companies are running around the world to find the best way to protect their purchasing power, and ultimately they decided to buy Bitcoin." He even boldly predicted that Bitcoin will rise to $500,000 per coin by the end of 2030.

Image source: Photo Network

Many Wall Street financial institutions have also begun to make plans to get a share of the Bitcoin trading pie.

According to foreign media, citing people familiar with the matter, Goldman Sachs has restarted its cryptocurrency trading desk and will provide clients with Bitcoin futures and non-deliverable forward (NDF) trading services starting this week. The person familiar with the matter said that the team is part of the bank's global markets department, which was established by Goldman Sachs to cope with the rapidly growing digital asset field. The person revealed that Goldman Sachs is also exploring the possibility of a Bitcoin exchange-traded fund and has issued a request for information to explore digital asset custody.

In addition, JPMorgan Chase reportedly stated in a filing with the U.S. Securities and Exchange Commission (SEC) that it will issue a structured note related to cryptocurrency. The product will allegedly not invest directly in Bitcoin, but in related companies.

Mining machines are in short supply

The price of mining machines has always been closely related to the value of the currency. In the past six months, the rising price of Bitcoin has driven a surge in demand for mining machines. Investors have purchased more high-computing mining machines, hoping to gain more stable returns by increasing computing power while the currency price is high, which has driven up the price of mining machines.

According to Xinhua News Agency, many mining machine manufacturers' official websites show that new machines are sold out. Bitmain's official website shows that the Antminer S1995T, S19Pro110T and other products on sale have been sold out and will not be delivered until August. In addition to the new mining machines being sold out, second-hand mining machines are also snapped up as soon as they appear.

According to the 21st Century Business Herald, Jiang Zhuoer, founder of the Litecoin Mining Pool, believes that this year is likely to be a year when mining machine profits exceed the increase in Bitcoin. Due to the shortage of chips, the increase in Bitcoin mining computing power in 2020-2021 is very small. If the computing power remains unchanged, the number of coins mined by a mining machine every day is fixed. In the last round of increases, the price of the currency and the computing power increased simultaneously, so the daily output of a mining machine was relatively stable. However, this round of computing power increase is not as fast as the price of the currency, which leads to a faster increase in the value of Bitcoin that can be mined per TiB of computing power, which is also the reason for the sharp increase in the price of mining machines in this round. For example, the latest S19 mining machine has the smallest increase, and the price has also increased from 15,000 to about 60,000 now, which is more than 4 times. If it is an old mining machine with high power consumption, because its electricity bill itself accounts for a high proportion, assuming that it used to pay 8 yuan for electricity to mine 10 yuan of Bitcoin, and only produced 2 yuan, but the price of the currency has increased fivefold, and the computing power has not increased much, it means that 8 yuan of electricity can mine 50 yuan of Bitcoin, and the output is 42 yuan, which is 20 times the output. This also leads to a greater increase in the price of old mining machines.

BitDeer COO Ye Jiejie said that China is still the center of the Bitcoin mining industry. Last year, more than 50% of the world's 9.6GW of mining power was located in China, and the United States ranked second with about 14%.

The sharp fluctuations in the price of Bitcoin have also put mining machine manufacturers on a roller coaster ride.

According to the third quarter financial report of 2020 disclosed by Canaan Inc., a domestic mining machine giant listed on the US stock market, its revenue was 163 million yuan, a year-on-year decrease of 75.7%, and the net loss attributable to Canaan Inc. shareholders was 84.8 million yuan, while the net profit in the same period of 2019 was 94.6 million yuan. At that time, Canaan Inc.'s stock price had been hovering around 5-6 US dollars.

As the price of Bitcoin has soared this year, Canaan Inc.'s stock price has also soared. In just one and a half months from February to now, the stock price has risen more than seven times, with a market value of US$5.4 billion.

However, at a time when Bitcoin is so hot, there are also people who pour cold water on the market from time to time.

According to Xinhua News Agency, US Treasury Secretary Yellen had previously stated that Bitcoin is not a widely used trading tool and that current Bitcoin investment is "highly speculative."

Yellen previously stated at an online seminar that using Bitcoin transactions is "extremely inefficient" and that Bitcoin has major risks in terms of legality and stability, and investors may suffer losses.

Daily Economic News is compiled from Xinhua News Agency, The Paper, 21st Century Business Herald, China Business News, and China Securities Journal

Daily Economic News