Bitcoin has broken through the psychological price barrier after jumping around under $20,000 per bitcoin for the past month.
In the last 12 months, the bitcoin price, hitting $20,440 on the Luxembourg-based Bitstamp exchange before slightly falling back, has risen by about 200 percent as governments ramp up spending in the wake of coronavirus lockdowns, investors look to bitcoin as a hedge against inflation, and institutional interest in bitcoin increases.
Bitcoin investors, who this year cheered the increase in bitcoin prices, feel increasingly optimistic going into 2021, with many believing that the price will continue to grow.
As we come to the end of what was an iconic bitcoin year, I can only see more positive growth in 2021," said Danny Scott, chief executive of the Isle of Man-based bitcoin and cryptocurrency exchange CoinCorner via email, pointing to the U.S. business intelligence company MicroStrategy MSTR adding bitcoin to its corporate treasury and payments giant PayPal PYPL rolling out bitcoin purchasing and selling bitcoin."
Bitcoin's $20,000 spike comes after a Reuters study saying that fund manager Ruffer Investment Management transferred around $675 million of the money of its customers into bitcoin. Earlier reports had indicated that a much smaller amount had been allocated to bitcoin by the London-based company, which manages assets worth around $27 billion.
"This will eventually happen again compared to 2017 when demand came from the retail market, of course the current demand comes from an institutional level completely flying under the radar for many people and it looks set to continue through 2021," Scott continued.
So far this year, MicroStrategy has purchased about $500 million of bitcoin, doubling down on its bitcoin gamble last week and raising another $650 million to buy more bitcoin through a bond sale.
Other companies have followed the lead of MicroStrategy and bitcoin has been called by a number of high-profile investors as a possible hedge against inflation they see on the horizon.
Ray Dalio, the legendary billionaire founder and co-chairman of the world's largest hedge fund, Bridgewater Associates, acknowledged earlier this month that bitcoin has now developed itself as a "alternative gold-like asset."
Some seasoned bitcoin traders, however, gave potential bitcoin buyers words of alert.
"Financial author and trading veteran Glen Goodman said via email, "History has a message for individuals buying at the latest all-time high.
"While I'm hopeful about bitcoin's long-term prospects, we had a somewhat similar situation with bitcoin breaking new ground four years ago, but its price plunged by more than a third only two weeks later.
Of course history does not always repeat itself but the lesson is to be on your guard. The market also offers hard lessons in modesty to those who risk so much is a sure thing about what they're told.
"In recent weeks, some of the world's largest investors have been singing the praises of bitcoin. This means that bitcoin is already owned and aims to allow more individuals to purchase and raise the price upwards. Often 'whales' on Wall Street do this to sell their bitcoins at higher rates to the little guys.
