Bitcoin’s market cap surpassed the $1 trillion value for the second time in history this week. As more institutional players enter the space, from MicroStrategy and Tesla to PayPal, Mastercard, and BNY Mellon, and global macro factors set the stage for a hard asset like BTC, what’s going to happen next? Digitex takes a look at how high BTC might go and what that means for the cryptocurrency markets in general. Check it out.
Increasing Institutional Adoption
At the time of writing, BTC was still some way off its all-time-high hovering around $55K. Yet, the number-one cryptocurrency is still up more than 90% YTD – and over 600% in the last 12 months. This latest rally has been attributed to the rising participation of institutional investors who have increasingly been accumulating BTC for their corporate treasures as a balance sheet asset.
At a time when traditional “low-risk” assets like bonds and treasuries were returning negative yield, publicly listed companies had a duty to their investors to adjust their portfolios to achieve a better risk/ratio reward – opening the door for BTC with its undeniable ability for capital appreciation.
MicroStrategy really kicked off this trend in earnest last year, followed by Square, Tesla in February 2021, and many others. Most recently, Chinese app maker Meitu announced the purchase this week of not only BTC but ETH, leading to the question of whether more companies will turn to ether as a balance sheet asset as well. This would have been completely unthinkable during the last bull cycle.
When you look back just a few short years ago to the last BTC bull run, the difference is night and day. The largest financial institutions in the world led by the likes of JPMorgan were busy calling BTC a fraud and a scam. The regulatory framework was unclear, there was uncertainty surrounding the hard fork that split the Bitcoin blockchain in two to create Bitcoin Cash (BCH), and institutional investors (for as much as they may have wanted to participate) were unable to make such an “irresponsible” purchase on behalf of their investors. There was also no COVID.
Fast-forward to today and the institutions are FOMOing in. JPMorgan CEO Jamie Dimon may still admit that BTC is not his “cup of tea,” but the leading investment bank now believes that $146K BTC is not an unrealistic target. CitiGroup analysts believe that BTC could pass $300K by the end of this year, and many Bitcoin evangelists, core developers, and traders place that target at as much as $1 million. The truth is, as adoption increases and larger investors enter the space clamoring to buy their share of a hard-capped asset, how high BTC could go is really limited by one’s own imagination.
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The Wider Global Economy
The cryptocurrency markets have been on a tear since their lowest point last year on that dreaded March 12 selloff. Global governments began to print money unchecked in response to the economic fallout from COVID-19, with the U.S. Federal Reserve expanding the money supply by as much as 20% in 2020 alone.
This has since sparked fears of incoming inflation as the US dollar devalues and investors seek alternative assets as a hedge against inflation – rather than hold onto what MicroStrategy’s Michael Saylor called a “melting ice cube,” (cash).
Combined with negative yields on U.S. Treasuries, low-interest rates, and another eyewatering stimulus bill worth almost double the market cap of BTC at $1.9 trillion, and alternative assets like BTC become more attractive.
Of course, with large institutions and household names entering the space, along with endorsements from some of the world’s most influential people like Elon Musk, BTC is increasingly legitimized as an asset class, and more and more retail traders begin to follow the money.
They aren’t stopping at BTC either. BTC may command the highest demand from institutions for its proven thesis, time in the market, hard cap, and acceptable regulatory framework, but, as we’re seeing from the massive growth in popularity of DeFi and the rising interest in Ethereum, ether also marked a new all-time high this year above $2K.
Ether futures, which also offer traders high liquidity on the Digitex exchange, have been launched on the regulated CME giving institutional investors more exposure to Ethereum, and solutions for its scaling look imminent. Public companies are beginning to accumulate ether as well as bitcoin for their balance sheets, and, as the economy struggles and cryptocurrencies shine, ETH and other cryptocurrencies look set to blast through their new all-time highs soon as well.
Potential Headwinds on the Way
Of course, this is crypto and nothing is certain. We already witnessed how a spike in U.S. Treasuries spurred a selloff in the stock markets, (particularly the tech-heavy Nasdaq) that spilled over to all risk assets last week. Let’s also remember that, while retail may now be handing the baton over to institutions, these markets have been driven by small investors. Once BTC starts marking new all-time highs, particularly around $100K, we’ll likely see some price pullbacks as people cash in some of the holdings to enhance their lifestyles.
We may also start to see a deceleration of BTC accumulation if investors chose to gain exposure to BTC indirectly through buying shares in newly-listed cryptocurrency companies or in companies like Tesla, MicroStrategy, and others who begin to accumulate more BTC. There is also always the real threat of regulation, particularly influencing ETH price. If regulators come down hard on the growing DeFi sector, that could have a major impact.
Whatever happens in the coming months, the long-term trajectory of cryptocurrencies has never looked more bullish. And for traders, there has never been a better time to capitalize on the volatility as the prices of BTC and ETH accelerate and correct on their ways to new all-time highs.
Trading BTC and ETH futures is your fastest way to making gains, using leverage to amplify your position without having to purchase the underlying asset. So, whether you are long or short BTC or ETH, trade futures on the Digitex exchange. We’re still the only exchange in the industry to offer zero commissions on all trades and a one-click trading ladder that lets you take advantage of even the smallest fluctuations when time – and speed – are of the essence.
We’re also offering traders ultra-high liquidity on both our BTCUSD and ETHUSD markets right now with 1.1 million contracts on the bid / and 600k offered, and a 24-hour volume of $35 million on BTCUSD; and 670k contracts on the bid / 345k offered, and a 24-hour volume of $6.7 million on our ETHUSD futures.
Simply purchase DGTX now and get started trading on highly liquid zero-fee markets as the two largest cryptos zig-zag their ways to higher heights.