The world’s biggest crypto by market cap and popularity, Bitcoin (BTC), has continued to surge to set its current all-time high of $61,700. Many now believe that it will continue rising to reach higher highs. The experts at Bloomberg Crypto are projecting an unprecedented price spike for BTC in 2021.
At the moment, the bitcoin price is about $60,500 and analysts have projected a massive price spike that may see the crypto surging towards $400,000 by the end of 2021. Bloomberg’s analysts have now based their projections upon historical price data that indicates surges several months after a BTC halving event.
Bitcoin To Hit $400K
It may sound like an exaggerated claim for anyone to assert that BTC may reach prices of $400K before the end of this year. But when such an allegation comes from a reputable analytics firm, it is worth taking a look at it.
Bloomberg Crypto analysts have predicted in a monthly report that BTC might surge up to reach new highs of $400,000, and the assertion is focused around the historical reaction to BTC’s halving event.
The months after the halvings of 2012 and 2016 saw the crypto gain about 55 times and 15 times its value, respectively. The current rally after the 2021 halving may be construed as strong proof that history might repeat itself. Bitcoin halving is described as an event in which the reward for the bitcoin mining process is cut by 50%. The last halving happened on May 11, 2021, and the block reward was reduced to 6.25 BTC.
Currently, BTC is in an identical position with the 2013 and 2017 events supporting this analogy. In case history repeats itself to surge to price extremes akin to the previous bull runs, the biggest crypto might reach $400K, according to the regression since 2011 high.
While the Bloomberg analysis is focused heavily on historical data and is subjected to a degree of probability, it is critical to note that the current BTC price rally is linked to the May 2021 halving event. That connection has seen BTC riding on the wave of a major run.
The Bitcoin Halving And The Price Action
Bloomberg’s prediction hinges on the BTC halving event and the surge in prices that follows in the next year. Bitcoin halving is the halving of the rewards of mining blocks after a set of 210,000 blocks get mined.
The halving takes place after about 4 years and the next one is expected to happen in 2024. About 12 to 18 months after the BTC halving events of 2012 and 2016, bitcoin recorded huge gains of over 50 times its initial value at the start of the halving. Bloomberg says:
“The year after a supply cut (halving) is what 2021 has in common with 2017 and 2013, along with subdued volatility.”
The crypto’s surging prices do not come as a surprise as history seems to repeat itself. But despite the bullish forecast by Bloomberg, the inflow of institutional funds for BTC dropped by 10% in Q1 2021. Based on Kaiko, the BTC-USD and BTC-USDT trading ratio can determine institutional inflows into the crypto space.
Q4 2021 was different for bitcoin. In this period, many institutional investors like Square, Grayscale, and MicroStrategy acquired a lot of bitcoin. This means that institutions are confident that bitcoin will rise further.
Institutions Believe Bitcoin’s Time Is Here
Bitcoin reached new all-time highs in March and the crypto has shown some resilience that enabled it to bounce back from such crashes that have come its way in the last ten years. With its huge ability to regain momentum time and time again, BTC seems to have overcome the ‘bubble’ label and it is slowly becoming increasingly popular with the institutional investors.
Previously, gold was the anti-fiat, which investors and institutions saw as a dependable store of value. After the 2008 economic crash, trust in governments plunged and BTC came to introduce new financial independence opportunities since no centralized bank or financial institution could control it.
Limited supply and the perception of an anti-governmental currency increased bitcoin’s value exponentially which transformed it into the digital gold dominating the new millennium. Many analysts say that there will be a switch from the gold standard to the bitcoin standard as time goes by.
Governments and their economic models show that various flaws exist from time to time again. Nations and governments are entitled to print money to support their economy and fully use these powers in some incidents, like during the 2021 pandemic when governments offered stimulus packages to their citizens.
Nevertheless, money never grows on trees, and with the European Union and the United States increasing cash flow to support their dwindling economies, inflation fears are becoming quite prominent.
The past standard of anti-fiat currency was gold. It served as a haven for the investors when the world was facing an economic meltdown. Unlike gold that increases in value when fear dominates the markets, BTC is also prospering even when the global economy is in full throttle.
According to ByteTree Asset Management Ltd data, investors seem to be reconsidering BTC as a new haven asset similar to gold. Notably, investment funds are holding bitcoin and gold as they gradually identify the value of the crypto.
The current economic environment has made people turn to Bitcoin due to its scarcity. Just like gold, bitcoin also gains more value when the investors become worried about hyperinflation. Nevertheless, the researchers discovered that spikes in Google searches do not directly translate to spikes in prices.
What researchers found is that BTC’s price is somehow related to bond yields and the recent pause in its surge directly correlated to a choppy momentum in the yields market. Institutions like Visa, Tesla, and MicroStrategy have pushed bitcoin’s price some more.
The acceptance of BTC as a method of payment has created a significant shift in the market perception, although bitcoin payments are ludicrous for some. For example, there was a person that paid 20,000 BTC for a pizza during the crypto’s early days.
The Bitcoin Price Is Still Fluid
For now, the bitcoin price is still fluid despite being majorly correlated to market sentiment and movements in bond yields. Analysts and commentators say that the flagship crypto has the potential to hit titanic highs. But, the price of anything scarce depends majorly on the perceptions of the people and institutions that invest in it.
BTC’s halving event and the longer period needed to hit the maximum number of mined bitcoins bring forth an environmental issue as a result of the high costs of energy usage. Lack of bitcoin usage may diminish the success of integration into the mass market, and the technology might eventually fail.
Unlike gold which is a tangible asset, bitcoin does not have anything to fall back on and may cause unexpected risks for the investors.
Bitcoin’s Popularity Contest
Bitcoin’s biggest flaw is its volatility. That has been an issue for the investors who have been quite reluctant to risk their portfolios on a new asset that is yet to be fully regulated. Nevertheless, recent developments with a drop in price volatility and consistent bounce back to new highs have paved the way for financial institutions and banks like JP Morgan to offer various investment possibilities.
Moreover, Bitcoin exchange-traded funds (ETFs) are now a highly talked about subject in recent years. Notably, Valkyrie Bitcoin Trust also filed a new application with the SEC to include BTC ETFs at the New York Stock Exchange (NYSE).
A great decision by the SEC might mean that Bitcoin will have a lower entry barrier, which, in turn, may create more stability in the market and increase BTC’s position as a new haven asset or store of value.