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Bitcoin could be a revolutionary asset at this unique time in history. Unless there is a major reversal in technical, fundamental, macroeconomic and micro trends, Bitcoin is likely to continue to appreciate. According to Bloomberg Intelligence analysis, Bitcoin's annual supply is expected to be about 2% in 2021, and is expected to drop to about 1% by 2024 and about 0.5% by 2025. By Mike McGlone, Senior Commodity Strategist at Bloomberg Compiled by: Carbon Chain Value Original Team 1. Bitcoin will continue to rise based on $20,000, and $50,000 may be the next stop for Bitcoin; 2. Bitcoin volatility decreases, and the price may "add a zero"; 3. Bitcoin will continue to attract conservative “gold bugs”; 4. Will a Bitcoin exchange-traded foundation be approved in 2021? With more quantitative easing policies expected to be introduced, demand for Bitcoin will rise while supply will continue to decrease. Bitcoin will continue to rise above $20,000, $50,000 may be the next stop for Bitcoin Bloomberg Intelligence believes that in 2021, Bitcoin will begin to "re-examine" the $20,000 price level, and it is likely to continue its bullish path, with price potential increasing until $50,000, and a market value of $1 trillion. As we have seen, compared with more than 8,000 other so-called cryptocurrencies, Bitcoin's digital gold attributes may be further enhanced as regulation matures, because most cryptocurrencies on the market are actually "coin issuance projects of a certain person or organization." Bitcoin is no longer a "junk coin" and has begun to gradually become mainstream, although it is still in the early stages of price discovery. Compared with 2017, one of the biggest differences in Bitcoin today is that the reputation risk has shifted, Bitcoin has begun to be recognized by most people, and the biggest threat at present may be some technical failures and "black swan" events similar to those that occurred in the first quarter of 2020. Bitcoin's next resistance level: $50,000 Bitcoin prices are rising by leaps and bounds. Will it hit $50,000 in March 2021? At the beginning of 2021, Bitcoin seems to be still advancing in the price discovery mode. As long as there are no substantial negative "surprises", Bitcoin is expected to continue to rise above $20,000. If we refer to the past experience of Bitcoin block reward halving, the price usually rises within a year after the "halving". Testing the $50,000 resistance level will be a "moderate move" and seems reasonable. The enthusiasm of institutional investors seems to be still rising. The $1 trillion Bitcoin market cap will be the next "key resistance". According to Bloomberg Intelligence estimates, as market adoption becomes more widespread, Bitcoin may turn from a "wave" into a "tsunami", and the speed of breaking through the key resistance level of $50,000 has also been accelerated. In 2020, the Bitcoin block reward was halved, which is one of the reasons for the sharp rise in prices. If we look at the past "halving history", we find that: 1. Bitcoin price increased 55 times in 2013; 2. The price of Bitcoin increased 17 times in 2017. Bloomberg Intelligence analysis found that if the price of Bitcoin is slightly above $50,000, its market value is likely to exceed $1 trillion. What does this mean? $50,000 is actually less than twice the closing price of about $29,000 in 2020. Unlike past bull runs, the rise in Bitcoin prices in 2021 has two distinct differences: 1. Bitcoin is becoming more and more mature; 2. The market value of Bitcoin has increased. As market demand and adoption increase, and supply continues to decrease, it is expected that the probability of Bitcoin price rising in 2021 will increase significantly. Historical trends suggest Bitcoin is heading for $50,000 Bitcoin's advantage is more obvious: In December 2020, the U.S. Securities and Exchange Commission (SEC) formally sued Ripple Labs. The regulator believes that the Ripple currency issued by Ripple is an unregistered security, which means that the risks faced by the altcoin market are increasing, indirectly leading to the rise of Bitcoin's advantage. Bitcoin is becoming more and more like gold and is gradually becoming a "benchmark cryptocurrency". It is not a "digital currency issued by a certain person/project" and is organically adopted worldwide. There is no doubt that Bitcoin is gradually becoming "digital gold". If we compare the trend of Bitcoin and the Bloomberg Galaxy Crypto Index (BGCI), we can hardly see the possibility of reversing this upward trend, especially when Bitcoin has not yet reached the peak of the early stage of price discovery. (Bloomberg Note: Ripple has been removed from the BGCI index.) The entire crypto market is following Bitcoin Is Bitcoin overheated now? From the market point of view, the bull market is expanding very fast. We find that Bitcoin is in the early stage of a new stage of price discovery process. The current situation seems to be somewhat similar to that in May 2017, when the price of Bitcoin was about $2,800, which is twice the previous peak and its 20-week moving average. If this pattern is followed, the price of Bitcoin will be about 2 times higher than the 20-week moving average in early 2021, so it is not surprising to exceed $20,000. Will Bitcoin Continue Its 2017 Trend? Bloomberg Intelligence suspects that since Bitcoin may have entered a paradigm shift toward mass adoption around the world, there may be more time for a correction. Bitcoin Advantages vs. Stocks At the beginning of 2021, Bitcoin's annual volatility measures relative to the stock market hit their lowest level ever, and if early patterns hold, Bitcoin's dominance will last longer as its supply and volatility continue to decline. The performance may be better than the Dow Jones, and the price of Bitcoin may "add a zero". Relative to the stock market, Bitcoin has recovered from its lows. If the past cyclical patterns repeat in 2021, it means that Bitcoin will have a better performance this year. As can be seen from the Bloomberg Intelligence analysis chart, compared with the Dow Jones price index trend, the annual volatility of Bitcoin has been reduced to the lowest. It is expected that by 2024, only 900 new bitcoins will be generated every day, while 1,800 have been generated every day since 2016. As the supply decreases, the price will also "bias" towards Bitcoin. In addition, compared with the Dow Jones Industrial Average, Bitcoin's 260-day volatility is also declining towards the threshold. The reduced supply and lower volatility give Bitcoin an edge. Relative to the S&P 500, Bitcoin is recovering from its lowest yearly volatility, and if history is any guide, the Bitcoin/S&P 500 price ratio has great potential to exceed the 7x peak reached in 2017. 1. In 2016, Bitcoin’s 260-day volatility low was approximately 2.6 times that of the S&P 500. 2. In 2017, the price ratio of Bitcoin to S&P 500 reached 7 times, reaching its historical high. 3. At the end of 2020, Bitcoin's annual volatility was almost the same as that of the S&P 500 index, which means that Bitcoin as digital gold is rapidly maturing. Bitcoin/S&P 500 price ratio breaks 2017 peak If volatility is any indicator, then there is a chance that Bitcoin prices will continue their upward trajectory relative to stock prices. Digital gold? Bitcoin might be better Bitcoin is poised to continue to attract conservative "gold bugs". More and more traditional gold investors are allocating funds to Bitcoin, as evidenced by changes in fund flows and volatility. Bitcoin's price discovery potential is pushing it toward "digital gold". In today's fast-moving digital world, Bitcoin is more portable, tradable, and transparent, so Bloomberg Intelligence sees Bitcoin and gold as portfolio companions. Bitcoin has already outperformed gold, and as the market matures, the price of Bitcoin may "add a zero" in 2025, after all, Bitcoin is still in "hangover mode" since the 2017 bull run. Although it is unknown which "catalyst" may drive the price of Bitcoin to a new high, it seems to be performing well from the demand/supply indicators. If Bitcoin follows the previous price increase pattern, it is expected to reach $100,000 by 2025. Money is starting to flow out of gold and into Bitcoin. Bitcoin’s capital flows are increasing in regulated cryptocurrency exchanges, while gold market outflows are also increasing, which may indicate that Bitcoin’s price rise has lasting potential. Bloomberg Intelligence analyzed the changes in the inflows of the Grayscale Bitcoin Trust (GBTC) and the total holdings of gold ETFs, including: 1. The inflow of Grayscale Bitcoin Trust Fund has reached 570,000 BTC, setting a record high; 2. Gold ETFs have been in a downward trend since hitting a peak in October 2020, from 111 million ounces to 107 million ounces. Investors are moving bitcoin in and gold out In US dollar terms, the Grayscale Bitcoin Trust has a market value of just over $19 billion, while the gold ETF was valued at about $220 billion on January 6, meaning the Grayscale Bitcoin Trust is about 10% the size of the gold ETF. At the beginning of 2020, the Grayscale Bitcoin Trust was only 1% the size of the gold ETF. While there are other funds tracking Bitcoin on the market, the Grayscale Bitcoin Trust is by far the largest and therefore the most representative. Bitcoin demand and supply are becoming increasingly "favorable" Will a Bitcoin ETF be approved in 2021? In fact, the market may see more quantitative easing policies, and as the supply of Bitcoin gradually decreases, it will stimulate further demand for Bitcoin. Bloomberg Intelligence believes that mainstream adoption of Bitcoin, the gradual decline in Bitcoin supply, and the seemingly unstoppable quantitative easing policies on a global scale will provide strong support for Bitcoin in 2021. Grayscale Bitcoin Trust has become the first choice for many traditional investors, and the amount of funds flowing into it is also growing, including some of the largest US exchange-traded funds. Is the tide coming? Bitcoin is becoming more mature: Grayscale Bitcoin Trust premium is falling. Large institutional investors are accelerating their accumulation of Bitcoin, while the premium of Grayscale Bitcoin Trust has begun to decline. These seem to be key indicators that Bitcoin is becoming mainstream. Bloomberg Intelligence analyzed the lowest 200-day moving average of Grayscale Bitcoin Trust premium, which is about 18%. As a single investment tool, Grayscale Bitcoin Trust currently holds about 570,000 bitcoins and seems to be "adding", thus also providing support for the rise in Bitcoin prices: 1. In 2019, the number of bitcoins held by the Grayscale Bitcoin Trust Fund accounted for about 1% of the total bitcoin mined; 2. In 2020, the number of bitcoins held by the Grayscale Bitcoin Trust Fund accounted for approximately 3% of the total Bitcoin mined. Grayscale Bitcoin Trust Premium Declines, Market Depth Increases The Grayscale Bitcoin Trust, a leading investment vehicle that provides traditional investors with exposure to Bitcoin, is a pioneer in U.S. exchange-traded funds and should increase market demand for Bitcoin. Bitcoin Supply Tightening vs. Quantitative Easing Bitcoin could be a revolutionary asset at this unique time in history. Barring a major reversal in technical, fundamental, macroeconomic, and micro trends, Bitcoin is likely to continue to appreciate. According to Bloomberg Intelligence, Bitcoin's annual supply is expected to be about 2% in 2021, and is expected to decline to about 1% by 2024 and about 0.5% by 2025. In this rapidly changing digital world, the balance sheet of the G4 central banks as a percentage of GDP is rising rapidly, which also provides a favorable macroeconomic foundation for Bitcoin. Demand, supply, macro and micro economics all favor Bitcoin < END >
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