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(Kitco News) The crypto world is on fire, with bitcoin breaching $20,000 for the very first time on Wednesday and hitting new all-time highs.
This is the highest the cryptocurrency has ever been after an already very stellar year, which saw gains of more than 170%. At the time of writing, bitcoin was trading at $20,672, up 6.23% on the day.
Driving this rally is a wider acceptance of bitcoin and increased interest from larger investors, who are viewing bitcoin as a store of value amid massive money printing and unlimited quantitative easing.
Analysts remain very optimistic on bitcoin’s future price action, saying that this rally is different from the one back in 2017 when bitcoin first approached $20,000.
This time around, institutional investors are getting involved, while IPOS defined 2017, said Digix co-founder and COO Shaun Djie told Kitco News.
“In 2017 surge in bitcoin was mainly driven by initial public offerings. This led to a lot of scams. That in itself is not something you see any more today. There are other changes as well, such as institutions getting involved in bitcoin. There is more legitimacy in bitcoin now,” Djie said.
One of the biggest risks next year is inflation, and institutional investors have started to embrace bitcoin as protection against that.
“Inflation would the biggest and most immediate risk as it would slaughter bonds, lower equities’ multiples, and destroy the strategies which rely on the negative correlation between the two asset classes,” said StoneX director of global macro strategy Vincent Deluard.
And with vaccines being distributed next year, people will start to get back to their normal lives, which will increase demand for real goods while supply will still be constrained, Deluard explained.
“The thing that bitcoin has going for it is a finite supply. Value increases as the supply of other assets grows. In 2021, if we do see what I expect — significant correction in equity market and people worried about debt levels and inflation, bitcoin has a way to move money outside the system,” Deluard said.
Bitcoin, like gold, offers an alternative option to investors who are worried about the current quantitative easing program, all the money printing, and the massive rally in stocks, which is happening despite the grim economic outlook, said Djie.
Going forward, analysts remain bullish on bitcoin. Djie noted that he is not ruling out a move to $25,000 in the first quarter of next year.
Bloomberg Intelligence analyst Mike McGlone is looking at a possibility of $50,000 next year, adding that it is unlikely that the cryptocurrency will fall below $10,000 again.
“We could be heading towards $50,000 resistance next year. Realistically, in 2021, supply has been reduced after the halving this year, and demand is…
Read more:Bitcoin hits new record high as it breaches $20K for first time, is $25K next?