Bitcoin breaks through the $13,000 mark, what is the secret behind it?

Bitcoin is going crazy!

At 13:20 on June 26, the price of Bitcoin briefly broke through the $13,000 mark, reaching a new high since January 2018. The 24-hour increase reached 14.00%, and the total market value reached $224.7 billion, equivalent to the market value of Intel Corporation.

According to non-small data, the cumulative increase in Bitcoin prices has exceeded 230% since the beginning of this year, surpassing all global stock markets, commodities and other risky assets, and is the world's leading bull market.

Compared with the bull market in 2017, the surge in Bitcoin this time was even faster.

In 2017, it took 114 days and 17 hours for Bitcoin to rise from US$4,000 to US$13,000; in 2019, it took 85 days for Bitcoin to rise from US$4,000 to US$13,000.

Another data worth noting is that Bitcoin's market value has exceeded 60% of the total market value of cryptocurrencies for the first time, reaching a historical high in the past 17 months and currently occupies an absolute dominant position in the market value share of cryptocurrencies.

Bitcoin is getting stronger and stronger, while altcoins are standing still. All signs indicate that this is just a bull market for Bitcoin!

What is the logic behind the Bitcoin bull market, and why is Bitcoin the only one that stands out?

The global interest rate cut trend begins

At the macroeconomic level, the strong wave of interest rate cuts by global central banks may be the first key to unlocking the price of Bitcoin.

As global economic risks continue to increase, the main theme of global monetary policy is gradually moving towards easing, which may usher in a new round of "interest rate cuts."

India fired the first shot in interest rate cuts in February this year. Since May, the central banks of India, South Korea, New Zealand and Australia have all sounded the clarion call for interest rate cuts. Major central banks in Asia and Oceania have collectively ushered in a wave of interest rate cuts.

The Federal Reserve, which raised interest rates four times in 2018, has remained on hold this year, but its stance has clearly turned dovish.

On June 19, the Federal Reserve announced that it would maintain the target range for the federal funds rate at 2.25% to 2.5%, but hinted that it might cut interest rates in the near future.

Wang Qian, chief economist for Asia Pacific at Navigator, the world's largest mutual fund, said the Federal Reserve has lost the best window of opportunity for interest rate cuts in June and may see a larger interest rate cut in July.

Lowering interest rates will reduce the yield on bank deposits, which is equivalent to a disguised devaluation of the currency, and capital is profit-seeking.

Currencies that are unwilling to depreciate will look for new habitats and invest more actively in risky assets with higher yields. In the past, their shelter was usually the stock market or gold, but now they have a bolder choice - Bitcoin.

Risk aversion

Bitcoin has always been seen as a hedge against global risks. Whenever the world's political and military situation is unstable, the uneasy mood will be directly reflected in the price of Bitcoin.

In 2013, a debt crisis broke out in the Mediterranean island country of Cyprus. Suddenly, the people of Cyprus began to buy Bitcoin crazily. Starting from March of that year, the price of Bitcoin rose from US$30 to US$250 within a month.

Because of this crisis, the world's first Bitcoin ATM appeared in Cyprus, and Bitcoin began to enter the public eye.

In 2019, the black swan reappeared.

On June 20, an MQ-4C drone of the U.S. Navy was shot down by an Iranian surface-to-air missile. According to the New York Times, U.S. President Trump originally approved a military strike on the 21st local time in Iran in retaliation for Iran's shooting down of the U.S. drone, but finally withdrew the order.

The game between the United States and Iran continues.

U.S. President Trump said on the 22nd that the United States will introduce new sanctions against Iran to prevent Iran from obtaining nuclear weapons, and does not rule out the possibility of taking military action against Iran.

As unrest spreads in Iran, Iranians have begun buying and selling Bitcoin through various over-the-counter means. According to CCN, recently, the price of Bitcoin has seen a 30% premium in Iran's over-the-counter market, indicating strong local demand for safe-haven assets.

Institutional funds enter the market

Who is buying Bitcoin and why?

Bitcoin analyst Rhythm revealed in a tweet at the end of May that Wall Street whales were also hoarding Bitcoin due to FOMO.

Grayscale Investments, which calls itself a “global leader in digital asset management,” purchased more than 11,000 BTC in April 2019, which is equivalent to purchasing 21% of Bitcoin’s monthly supply of 54,000.

If Grayscale continues to purchase BTC at its current monthly rate, it could own 42% of Bitcoin’s monthly supply after the 2020 halving.

According to Grayscale’s latest update (June 25), the total cryptocurrency assets amounted to US$2.6 billion, of which the BTC Trust Fund accounted for approximately 95% of its managed assets, occupying an absolute leading position.

The current rise in Bitcoin has nothing to do with the general public. The fundamental reason is that institutional investors are increasing their holdings of Bitcoin in large quantities.

There are only a handful of ponds in the market that can accommodate institutions, and Bitcoin is the largest one among them. Among the investment options of institutions, Bitcoin is the only one that is most suitable.

This may explain why Bitcoin continues to rise while most altcoins are standing still.

Facebook Coin

On June 18, Facebook dropped a bombshell on the world, launching the cryptocurrency Libra, claiming to build a borderless currency and financial infrastructure to serve billions of people.

The news that Facebook, a global social giant with 2.7 billion users, is entering the field of cryptocurrency has undoubtedly added fuel to the surge in Bitcoin prices during Bitcoin's bull run.

Facebook's coin issuance is not directly related to Bitcoin. Its greatest significance lies in the fact that it has vindicated the blockchain, allowing people who originally had tinted glasses to correct their prejudices and realize that blockchain is not a scam industry. It may be the future direction of financial technology, and it also allows people to see the potential and value of blockchain in areas such as payment.

This will also attract off-market funds to participate in Bitcoin investment.

CFTC approves LedgerX to offer physically settled Bitcoin futures contracts

On June 25, documents on the CFTC official website showed that the U.S. Commodity Futures Trading Commission (CFTC) has approved Bitcoin derivatives provider LedgerX to provide physically settled Bitcoin futures contracts.

LedgerX is the second company to be approved to offer physically settled Bitcoin futures. According to Coindesk, Juthica Chou, Chief Risk Officer and Operating Officer of LedgerX, said that they will serve customers of any size and will not be limited to institutional-level customers, which means that the company can also provide new futures contracts to retail customers.

Like Bakk, the exchange launched by Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, LedgerX trades physically delivered Bitcoin futures.

When the contract expires, both the long and short parties need to prepare spot for physical delivery, which will help increase the demand for physical Bitcoin, while curbing excessive speculation in the market and making Bitcoin's financial ecology more complete and stable.

Can I still buy Bitcoin?

Since the beginning of this year, the price of Bitcoin has risen by 230%, reaching a high of US$13,000. Is it still possible to buy it?

For any Hodler (long-term holder), this question does not seem to be a problem, the answer is yes.

Anthony Pompliano, founder of cryptocurrency company Morgan Creek, recently published an article titled "Off The Chain" stating that "Bitcoin could reach $100,000 by the end of 2021."

The main reason he gave was that the price of Bitcoin is controlled by market supply and demand, and Bitcoin is expected to see a production cut in May 2020.

Currently, the number of rewards that Bitcoin miners receive is 12.5, and in May 2020, the reward for each miner will be halved again to 6.25 new Bitcoins.

Bitcoin’s inflation rate is currently around 3.76%, and by May next year, this rate will drop to 1.8%.

In the next few years, Bitcoin will see incredible demand growth, including adoption by large institutions, approval of multiple ETFs and retail investment products, increased global instability, and sluggish performance of traditional financial markets.

Text丨Buliang