Today, Bitcoin’s pushing past even its most recent all-time highs, having already hit $35,000 last night. As it continues to show no signs of slowing down over the long-term, it’s logical to wonder: what makes this time different? Why is the period of 2020–2021 not the same as 2017?
Truthfully, it all boils down to pure speculation versus the realization of Bitcoin’s fundamentals. Think back to October 2020. At that point, Square had just announced that they’d purchased 4,709 Bitcoins at a price of $50 million for usage in their treasury reserves. This, together with their whitepaper which detailed how other institutions could do the same kickstarted an institutionally-driven rally that’s still going on today.
While a horde of publications share all sorts of opinions on what’s driving Bitcoin’s current growth, the true catalyst for it is actually quite simple to identify.
Why Bitcoin’s Digital Gold: A Reminder
From October 2020 to now, the common thread in all of the institutional in-flow into Bitcoin is the realization of what both digital scarcity and decentralized governance really mean for investors and the global financial system at-large. Finally, there’s a macro-hedge that is truly beginning to break away from just about every other market in terms of its’ correlations. As Raoul Pal says, “Bitcoin is a life raft” and that life raft takes investors of all classes away from the chaos of the global financial system and towards a new one that’s being built with decentralization at its’ heart.
If you’re interested in Bitcoin’s specific performance as that life raft, head here to where I posted on the subject for the Norwegian Block Exchange’s blog. In any case, suffice it to say that in 2020, Bitcoin really began to show that it can break away from the price movements of stocks and gold, while consistently offering far better returns than bonds.
What happens next for Bitcoin?
The age of reliable ROI from all traditional markets isn’t dead yet, but it’s on shaky footing. As COVID-19 began to worsen, many of us experienced the true power of government-driven market manipulation for the first time and realized that a better savings technology wouldn’t just be great to have, it’s needed.
In my mind, that technology is Bitcoin.
As we move further into 2021, I feel that it will continue to prove its’ place both as a reliable hedge and as the best option for long-term savings around. With an average yearly ROI of 363.6% to date, it’s hard to argue with that sentiment.
Disclaimer: None of this post is direct financial advice. Invest at your own risk.
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