The Economic News of Buenos Aires, Argentina, published on January 17 an article entitled “How is the current Bitcoin appreciation similar to or different from the 2017 bubble?”, which analyzed the multiple factors of Bitcoin price increase.
This is not the first time Bitcoin has continued to rise. It had a bubble in 2017 and everything that has happened since December 2020 evokes these memories. 12 years after the issuance of Bitcoin, the price of this cryptocurrency at the beginning of 2020 was about 8,000 US dollars, which fell to about 5,000 US dollars in March but started increasing to 20,632 US dollars in December, returning to even higher than the 2017 record.
By January 2021, the price has reached 41,000 US dollars and the current price is about 35,000 US dollars. “Will the scene of 2017 reappear? Will the bubble be bigger this time and will the sound be louder after it bursts?” The US “Wired” monthly magazine raised this question. At first glance, the situation seems very different.
According to the journal, the Bitcoin boom in 2017 was full of signs of hysteria, such as “the novel and little-known technology, the doubtful promise of unlimited income and small investors dedicating all they have being the majority and so on”. This rise seems much calmer.
Lex Soklin, an expert at Conson Systems, an American financial and technology company, said: “There are fewer and fewer people holding the idea of preemptive opportunities.” Soklin analyzed Google search data and found that everyone was eager to join Bitcoin gold rush in 2017. But this has never happened again.
“Wired” pointed out: “Although this is hard to be regarded as a scientific proof, it proves a real change: this time it is not the inexperienced retail investors, but the financial tycoons. “
In the current process of the legalization of Bitcoin, companies such as the American Micro Technology Strategy Company, MassMutual Mutual Life Insurance Company and Skybridge Capital Corporation are all betting strongly on Bitcoin.
The article quoted an analysis by PricewaterhouseCoopers as saying, “Between 2019 and 2020, many funds focused on cryptocurrency investments represented by Bitcoin and their assets under management doubled from US$1 billion to US$2 billion.”, “This cryptocurrency was originally an anti-establishment tool that can avoid government inspections and lubricate the gears of the black market. Now it is gradually being accepted by financiers.”
Another factor that helped Bitcoin calmly rise was that major financial technology companies such as PayPal and Robin Man made Bitcoin easier to buy.
Most importantly, the U.S. Department of the Treasury’s Office of the Comptroller of the Currency authorized banks to provide Bitcoin “custodial services” to their customers and announced that banks could participate in the construction of block chain networks (i.e, digital infrastructure for cryptocurrency transactions).
Regardless of the direct results of these measures, Sokolin believes that the most important thing is the message it conveys, which may encourage senior investors.
The article pointed out: “The greater interest shown by institutional investors means two things to Bitcoin: one is that they usually buy more than ordinary people; the other is that they tend to hold for a long time, which makes the supply of Bitcoin in circulation scarcer. So the price is raised.”
The article reminded that there were some other factors that determined Bitcoin’s upward trend in 2020. The first was the halving of the number of Bitcoins. This is an automatic process that occurs approximately every 4 years, with the most recent being on May 11, 2020. The second factor was the new crown epidemic. People have always believed that Bitcoin is a “safe haven” asset that is not affected by macroeconomic fluctuations in the real world. The extreme difficulties of 2020 might convince some people: given the global chaos, why not try investing in Bitcoin?