Some proponents of popular cryptocurrencies have identified BTC as a suitable hedge against monetary depreciation and other forms of economic uncertainty.
Bitcoin is often featured in discussions around the possibility of a safe-haven asset that could be used as a hedge against another global recession. However, when the panic about the Covid-19 pandemic hit, it turned out that BTC was not free from this influence. At that time, Bitcoin fell nearly 50%, hitting around $ 3,800. However, exactly eight months since then, the price of BTC has risen by more than 300%.
"This up cycle will take us well beyond the previous ATH in the long term and with government spending increasing and May halving, we are poised for one of the most exciting bullish periods in Bitcoin history," Todaro said again.
Although inflation remains a real concern for many countries, in 2020 and this year Bitcoin has experienced its supply through halving. Where the number of Bitcoin is increasingly limited and the difficulty increases, which can make the price even more expensive.
Meanwhile, several governments responded to the economic pressure caused by COVID-19 to adopt proactive monetary policies including injections of stimulus funds. According to World Bank estimates, global gross domestic product is expected to fall 5.2% in 2020, the biggest contraction in decades.
Recognizing the decline in the value of cash holdings, some companies have turned to Bitcoin as a treasury reserve asset. Nasdaq-listed Micro-strategy was in the news announcing the acquisition of 21,454 BTC worth $ 250 million at the time. More interest from large traditional institutions soon followed as they attempted to buy Bitcoin as a backup tool.
The business intelligence firm doubled its Bitcoin adoption policy with an additional purchase of 16,796-BTC ($ 175 million) in September. In less than two months, the company has seen the value of its BTC holdings grow to over $ 160 million. The same can be said about other non-crypto genuine companies that buy BTC in reserve.
“Bitcoin surpassing fiat currency is not a metric that we should focus on because fiat currencies do not have such a circulation limit. On the contrary, market cap is a better metric, and Bitcoin is now among the top 20 assets (rankings of stocks, ETFs and cryptocurrencies), "said
With more difficulties ahead for the economy and fiat currencies, Bitcoin appears poised to receive greater institutional attention as big money players seek alternative investment vehicles.
Indeed, the flow of smart money into Bitcoin has led some stakeholders to predict that BTC will challenge gold as the de facto hedge asset of choice for institutional investors. If so, then in the midst of global contraction this year it can be said that Bitcoin is superior to fiat currencies.
It is predicted that investor interest in Bitcoin will depress gold prices in the long run. According to strategists, JPMorgan led by Nikolas Panigirtzoglou on Tuesday (8/12/2020) said BTC prices are leaning to the downside, while gold looks more positive.
However, the good news is that BTC price movements in the medium and long term have the opposite direction.
"Bitcoin is an investment that institutional investors are only starting to look at, while gold investment is already very advanced."
"If the prediction of the BTC movement is correct in the medium and long term, gold prices will experience structural flow constraints over the next few years," concluded JPMorgan.
JPMorgan strategists, note that in the past two months, digital asset manager Grayscale's Bitcoin trust saw inflows of nearly $ 2 billion, while gold ETFs saw more than $ 7 billion in outflows.
Even so, institutional investors who are wealthy families are recorded to have more gold than Bitcoin, this was disclosed by JPMorgan.
For investors, traditional investments such as gold are still considered a “safe haven”, while Bitcoin, which is a new investment medium, will benefit from more and more institutional investors looking to this digital currency.
JPMorgan strategists, say that Bitcoin's intrinsic value will increase significantly over the coming months as mining activity increases. According to JPMorgan's observations, Bitcoin's intrinsic value is currently $ 11,000 - $ 12,000. When compared to the current market price of around $ 18,200.
Previously, the difference between intrinsic value and market price was wide. Mining activity will increase and become more difficult and expensive.
However, this has not happened at this time, partly due to disruption of mining activities from electricity supply due to typhoons and high rainfall in China. When conditions begin to return to normal, mining activity will increase and the intrinsic value of Bitcoin will too.
"We estimate that a 70% increase in difficulty, all in all, will see the intrinsic value approaching current market prices."
"While this is a large increase, an increase of similar magnitude has occurred in late 2017 and mid-2019. This means we think that it is likely that a larger share of the eventual closing of the gap between market prices and production costs could have come from the latter than in the latter. between the end of 2017 and mid 2019.
It was expected to take place and now we are witnessing the history 😎 It's nice to have them in crypto ecosystem yet their arrival brought some discussions, too ^^ Let's see the later phases of institutional investments :)