Think cryptocurrency and you can’t help but think of Bitcoin. The crypto-asset may occasionally be confused with cryptocurrencies as a whole, almost as a genericization and it’s easy to understand why: it’s the most well-known and easily one of the most valuable. And in recent weeks, the price of Bitcoin hit yet another all-time high.
With one Bitcoin costing you a staggering US$38,146 at the time of publishing (just one month ago it was worth a little over $19,000), the crypto-asset has seen a stratospheric surge in value recently. But what exactly has caused it and can we expect the trend to continue to the point where Bitcoin will cost ungodly sums of money. To find out, DMARGE reached out to Matt Harcourt, an analyst at Apollo Capital, Australia’s leading crypto-asset investment firm.
Before reading on; a quick disclaimer. Matt can’t and doesn’t provide investment advice, but instead provides an analytical view of the current market which can help you to make your own investment decisions.
“There are many factors that impact the price of Bitcoin”, Matt begins, “and it is extremely hard (if not impossible) for individuals to be able to explain the day to day price movements of the asset. The recent price explosion can be attributable to the culmination of broad themes that have been impacting the market all year as well as a big dose of FOMO from retail and even institutional buyers.”
“The COVID pandemic resulted in a significant increase in the money supply of developed countries.”
“When there is such a large depreciation in a country’s currency, individuals look to store their value elsewhere in order to keep up with inflation and maintain their wealth. This forced an incredible amount of money into the stock market, resulting in unjustifiable valuations and a crowded market.”
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“With the stock market looking less attractive as the pandemic worsened – but valuations kept soaring – savvy investors such as Paul Tudor Jones looked elsewhere for investment opportunities that the broader market wasn’t looking at yet, this investment opportunity was Bitcoin.”
“On the 11th of May 2020, Paul Tudor Jones appeared on CNBC television stating that Wall Street could be witnessing the historic ‘birthing of a store of value’ through Bitcoin. At the time the price of Bitcoin was around US$9,000 and Paul’s views were not shared widely in the hedge fund community.”
“However, this was the very start of Bitcoin’s current price run as Paul forced other big investors to take a deeper look into the asset. Following this interview, there have been many notable investors such as Stanley Druckenmiller who have come out and praised Bitcoin for being a scarce, non-sovereign and a fundamentally unique store of value that looks extremely attractive in a world of excessive quantitative easing and negative…