Life after $20,000: Where will Bitcoin go after breaking its all-time high?

The cryptocurrency space has been obsessed with the bull run that began in the winter of 2017, but with Bitcoin surpassing its all-time high of $19,655, the crypto world may be heading into uncharted territory.

A number of factors have combined to create the right environment for Bitcoin to surpass its 2017 highs. During the spring of 2020, the COVID-19-induced market crash saw BTC drop to around $5,000 before the prospect of a strong recovery drove new investment. Later in the year, news that PayPal would support the buying and selling of cryptocurrencies, as well as uncertainty surrounding the U.S. presidential election, further boosted Bitcoin’s momentum.

But what happens next? In recent weeks, Bitcoin has recorded a sharp rise, up 45.8% in just one month, according to data from numerous exchanges, and surpassed its all-time price high. But is this rise sustainable? Or will the world's most popular digital asset come crashing down?

Relying on market value

It is worth noting that Bitcoin's market value has skyrocketed along with its snowballing price. On November 17, 2020, Bitcoin's market value exceeded its all-time high. At present, this astronomical figure has surpassed companies such as PayPal, Netflix, Coca-Cola, and Disney, and has ranked among the 18 largest commercial companies in the world.

The larger the market cap, the greater the likelihood of a significant price increase. Bitcoin’s latest boost in market cap has been driven by large investments from companies like Square and MicroStrategy, as well as PayPal’s greater accessibility to the digital currency to its 286 million user base.

Another boost to Bitcoin’s appeal was the halving that occurred earlier in 2020, which saw the number of bitcoins released as mining rewards per block reduced so that the supply was also squeezed.

Changing investor behavior

After Bitcoin’s 2017 rally, there was a major crash, from which crypto markets have spent the better part of two years recovering. However, investor behavior today appears to be different than it was in 2017.

As shown in the above chart, Bitcoin has become a more popular asset for investors as we head into 2020. More wallets that normally buy and hold cryptocurrencies are turning to Bitcoin as a safe haven for crypto assets, while fewer cryptocurrency wallets are engaging in high-volume trading.

The chart also shows a correlation between a slowdown in holder accumulation and a drop in Bitcoin’s value. In terms of growth, more long-term investment should mean more stability and sustainability, and we can see that there are no signs of a slowdown in long-term investment in BTC.

Additionally, the current landscape has seen the emergence of a large number of high-quality, trustworthy crypto exchanges, which further promotes growth and confidence among new investors and helps safeguard Bitcoin’s long-term trajectory.

Paving the way to the moon

"Back in March, I predicted that BTC could reach $50,000 by the end of 2020, and now there is more and more evidence of this upward trend," Antoni Trenchev, co-founder and managing partner of crypto platform Nexo, told Decrypt. "The market likes round numbers - Bitcoin broke through $16,000 in a few days, then $18,000, and the next stop is $20,000."

"It's not impossible to hit $50,000 by the end of the year," he continued. "That would be a record driven not by mania, but by big, forward-thinking, financially and technologically savvy institutions pushing crypto into the mainstream."

Will Bitcoin head for the moon? Some commentators have claimed the cryptocurrency will hit highs of $300,000 within a year, fueling speculation about a pivotal moment for bitcoin’s mainstream adoption.

According to a leaked Citibank report, future gains for Bitcoin “are likely to peak in December 2021… and are expected to reach $318,000.”

“While unlikely, it appears that only a 102x low-to-high rally (the weakest rally to date in percentage terms) would be warranted, while the argument in favor of Bitcoin could be the most compelling ever,” said the report, titled Bitcoin: Gold for the 21st Century.

Volatility risks remain

However, investors need to be aware that while the outlook surrounding Bitcoin appears bright, the cryptocurrency world is known to see huge gains before experiencing devastating losses.

According to Fortune magazine’s The Ledger newsletter, “Simply put, a crash is inevitable — an asset that has risen 400% is due for a correction .” However, the article also points out that future drops will not be as severe as previous ones due to the amount of investment within the currency. The article concludes that this could mean that future corrections could see Bitcoin’s price drop to around $8,000 — instead of $2,000 — which also means that new investors will need to wait for potential speculative opportunities to emerge before buying Bitcoin.

Today, Bitcoin looks stronger than ever, so it makes sense that some cryptocurrency commentators are predicting a surge to over $300,000, but it would also make perfect sense for it to fall to as low as $8,000 within the same year.

As the world’s most famous cryptocurrency surpasses its all-time high, it will enter uncharted territory. But with the support of large-scale long-term investors and the backing of international payment giants, the 2020 bull run will likely end people’s nostalgia for 2017.

Compiled by: Public account @萌眼财经