Epic: Bitcoin price (BTC) above 40,000 US dollars
The Bitcoin (BTC) exchange rate cracked the impressive US$40,000 mark at 7.20pm on Thursday 7 January 2021. This means it has taken less than a week for the price to jump from US$30,000 to US$40,000. A pace that can justifiably cause fear. Why the correction has so far failed to materialise and how the exponential price growth can be explained.
On Thursday morning, it was not bitcoin but the overall market that was in focus. Thus, the total market capitalisation of all cryptocurrencies broke through the impressive mark of one trillion US dollars – in figures 1,000,000,000,000. Since midday, however, the bitcoin price has also set a The News Spy new record. On a 24-hour basis, the BTC price is up by more than 13 percent. On a weekly basis, it is even up more than 38 percent. With the exception of the cryptocurrency XRP, there is no other coin among the top 20 cryptocurrencies with a larger daily increase.
The Fear and Greed Index shows how greedy investors are for Bitcoin. This reflects the market sentiment and ranges from very pessimistic to very greedy.
As you can see, the pendulum swings all the way to the right. The result: extreme greed. However, this greed is mainly driven by large investors and not by private investors. All crypto asset managers from Voyager Digital to Galaxy Digital are announcing record levels of assets under management. Crypto exchanges are being literally bought out by institutional investors. This is also evident in OTC volumes such as Coinbase Pro, where billions of bitcoin are purchased daily.
Bitcoin securities suck the market dry
The sell-off of the still freely tradable Bitcoin is being driven by investment companies such as VanECK, Coinshares or ETC Group, which acquire Bitcoin in order to use it as an underlying asset for their financial products. Here you can find an overview of these Bitcoin securities, which private investors can also acquire.
Considering that these are only debt instruments like ETNs and not ETFs, the situation shows how dramatic the shortage of Bitcoin is. Bitcoin holdings on exchanges are melting away and being diverted into traditional finance. It is currently not expected that this trend will reverse. After all, only very few institutional investors are invested in Bitcoin. Many insurance companies, hedge funds and family offices are only just getting involved. If only a few percent or basis points of the funds under management are redirected into Bitcoin, this should enable prices well above 40,000 US dollars in the near future.
Bull market cannot be stopped, not even by a correction
Due to the trend of large assets being liquidated in order to allocate part of them to Bitcoin, the exponential growth shows that the market is overheating. Profit-taking will lead to a major correction at a certain point, without damaging Bitcoin’s rising trend in the long term. This means that the probability of a violent Bitcoin correction is very high and increases every day, but at the same time there is a lack of fundamental reasons why the bull market should come to an end. This tendency is also shown by the increased volatility in the bitcoin price: