Bitcoin price rises 10% overnight, breaking $13,000 for the first time in two years! The spring of bulls is coming

On Wednesday (October 21), the price of Bitcoin broke through $13,000 for the first time since 2018 after PayPal announced it would allow customers to use cryptocurrencies.

Bitcoin chart (Source: MarketWatch)

Up more than 10% in 24 hours

Bitstamp data shows that Bitcoin has risen by more than 10% in the past 24 hours, hitting a new high since June 2019 above $13,200.

Bitcoin rose by $950, or 8%, during traditional trading hours in New York. In early Asian trading, the index rose another 2%. Bitcoin's market value exceeded $250 billion.

Bitcoin’s rally was boosted by the news that payments giant PayPal was entering the crypto space, along with Ethereum, Litecoin and Bitcoin Cash.

All of these currencies are seeing significant gains today. Over the past 24 hours, both Ethereum and Bitcoin Cash have seen their prices rise by around 6%, with Ethereum surpassing the $400 mark and Bitcoin Cash rising to over $260, while Litecoin has seen a more than 14% increase to over $50.

After nearly breaking through $13,200, its rally suddenly stopped and corrected back to around $12,800. Ethereum, Bitcoin Cash, and Litecoin also saw sudden corrections.

24-hour Bitcoin trend chart (Source: bitstamp)

The other three cryptocurrencies all trended slightly down this week until today when they bounced back after the news came out, however, Bitcoin's trend this week and month has been completely different, breaking through $11,000 on October 9, reaching $12,000 yesterday, and then reaching $13,000 today.

Looking at the longer time scale, Bitcoin is up 7% in the past week, 22% in the past 30 days, and more than 76% so far this year. Bitcoin is now approaching the peak of the 2019 Bitcoin bull run, when the price of Bitcoin was close to $14,000.

In the past six months, the price of Bitcoin has steadily risen from above $9,000 to above $10,000. Although it has declined several times, it has been able to form effective support at key price levels and has now remained above $10,000 for 87 consecutive days.

PayPal surges

Payment giant PayPal announced support for cryptocurrency services such as Bitcoin, allowing users to buy and sell cryptocurrencies on the platform, which is an important milestone for digital currencies to enter the mainstream market.

In an interview, Dan Schulman, president and CEO of PayPal, said that the efficiency, speed and flexibility of cryptocurrencies have brought various benefits to people, and he believes that the final transformation of physical currency to digital currency is "inevitable". PayPal hopes that the service will stimulate the use of digital cryptocurrencies around the world. At the same time, this move will also help PayPal prepare for new digital currencies that may be developed by central banks in various countries.

He also said in a statement: "Our global reach, expertise in digital payments, bilateral networks, and strict security and compliance controls provide us with the opportunity and responsibility to help facilitate the understanding, realization and use of these new transaction tools."

PayPal said that in a few weeks, U.S. users will be able to buy, sell and hold digital cryptocurrencies in their PayPal wallets, but they will not be able to use cryptocurrencies to pay for products and services until early 2021. In the first half of 2021, the service will also be expanded to Venmo, one of its mobile payment services, and some other countries.

PayPal shares rose 5.5% to $213.07 following the announcement, their biggest gain since May.

Image source: Tencent's stock picks

Several other mainstream fintech companies, such as mobile payment provider Square and online stock trading platform Robinhood, have launched digital cryptocurrency services, but PayPal's entry into the market has caused a bigger splash.

Charles Hayter, founder and CEO of CryptoCompare, which provides cryptocurrency data and analysis, said PayPal has 346 million users and 26 million merchants, and the development brings more meaningful digital assets to the mainstream public.

Danny Scott, co-founder and CEO of U.K. bitcoin exchange CoinCorner, wrote in emailed comments that given Square’s revenue growth, “this news is not surprising to the industry.”

Mike Novogratz, head of Galaxy Investment Partners, called it the “biggest news in crypto this year” on Twitter, adding that a race would begin for banks to serve digital currencies. “We are over the hump,” he said.

Is Bitcoin's spring coming?

The news sparked a lively response from crypto fans, who pointed out that there has been a lot of positive news for cryptocurrencies recently, with more and more companies from the “traditional” world clearly entering the market:

In August this year, MicroStrategy (NASDAQ: MSTR), the world’s largest business intelligence trading company, has officially adopted Bitcoin (BTC) as its main reserve asset;

On August 30, Fidelity Investments announced it would launch its first Bitcoin fund, adding corporate endorsement and celebrity influence to the often-maligned asset class.

On October 8, Square (NYSE: SQ), one of the US mobile payment giants, announced that it had purchased approximately 4,709 bitcoins (with a total investment of US$50 million). After the announcement, bitcoin rose 2.6% in 2 hours.

On October 21, British fintech company Mode Global Holdings announced that it would hold up to 10% of Bitcoin in its reserves. Mode will become the first listed company in the UK to announce a large amount of Bitcoin holdings.

On the macro level, on October 20, the United States has basically finalized the stimulus scale of the economic stimulus bill. The White House said it is striving to reach an agreement within 48 hours, but Goldman Sachs said that the plan is unlikely to be passed before the end of the election. Some analysts said that it was in this context that Mode announced today that it would buy a large amount of Bitcoin.

In addition, some U.S. institutions have been frantically buying Bitcoin since the beginning of this year. 11 companies listed on the New York Stock Exchange have announced that they hold nearly 600,000 Bitcoins, which accounts for 3.2% based on the current circulating shares. If calculated based on the actual market circulating shares, it accounts for about 10%.

Industry insiders said that the biggest reason for institutions to increase their holdings of Bitcoin is the continuous monetary easing by the Federal Reserve, and they buy Bitcoin to hedge against the risk of US dollar inflation. These institutions generally believe that in the future digital economy, Bitcoin is more easily accepted and applied than gold, so they use Bitcoin as a means of asset allocation to hedge risks. With the strong endorsement of these companies and the continuous monetary easing by the Federal Reserve, the upward trend of Bitcoin should be continuous.

On October 13, Fidelity Investments released its latest Bitcoin investment research report, which showed that Bitcoin has a very low correlation with other assets such as stocks or gold, and trillions of dollars of new funds are likely to enter the Bitcoin market in the future. The report recommends allocating 5% of a multi-asset portfolio to Bitcoin.

The report states that “from January 2015 to September 2020, Bitcoin’s correlation with other assets averaged 0.11, indicating that there is little relationship between Bitcoin returns and other assets.”

Fidelity also suggested in the report that investors should consider allocating 5% of their portfolios to Bitcoin. Fidelity speculates that increased institutional interest could increase Bitcoin's market value by hundreds of billions of dollars in the near future.

Image source: Fidelity Investments

To support this argument, Fidelity simulated sample portfolios from a 60% stock and 40% fixed income instrument allocation scheme. Then, these portfolios were diversified by allocating 1%-3% of Bitcoin respectively. As shown in the figure above, in various scenarios of 1-5 year returns, portfolios with higher Bitcoin shares outperformed their portfolios with lower Bitcoin shares.

Bitcoin’s current market capitalization is just under $240 billion. By comparison, the alternative investment market was valued at about $13.4 trillion in 2018, according to estimates by the CAI Institute.

The report points out that as long as 10% of this part of funds flows into Bitcoin, the market value of Bitcoin will increase by $1.3 trillion. In addition, as the attractiveness of holding bonds may decline, the size of the alternative asset market may continue to increase in the next few years. If the optimistic forecast is realized, the market value of Bitcoin may increase to $2 trillion.

Bitcoin has been on a hot streak this month, rising about 19% in October on the back of bullish news. However, the use cases for cryptocurrencies remain limited. Data from blockchain research firm Chainalysis Inc. last year showed that almost no one uses Bitcoin except for speculation. (Network)