Bitcoin closes in on all-time high of $US20,000 as institutional buyers load up
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Bitcoin cracked $US18,300 ($25,170) in a busy Wednesday trading session, up 11 per cent on day at one point, as investors rushed into the cryptocurrency. Now some analysts believe Bitcoin could advance to $US20,000 ($34,000) by the year end.
The price of Bitcoin has risen 73 per cent in US currency since early October’s base of $US10,500 and is up 75.8 per cent in Australian dollar terms.
“Bitcoin has broken through the critical price milestone of $US17,000 and looks set to move higher,” eToro crypto analyst Simon Peters told Stockhead.
It was only a matter of time before Bitcoin’s price hit $US20,000, its high-water mark reached in December 2017.
“It is not out of the question for the crypto to hit its all-time high of $US20,000 this side of Christmas,” said Peters.
“In my view, sentiment is driving the price movements. Bitcoin is exciting investors, who are looking to add the cryptoasset to their portfolios,” said Peters.
The rally in Bitcoin started to flag as Wednesday wore on, and it had turned down to $US17,700 ($24,200) in late afternoon Sydney time.
Only last week, Bitcoin was trading at $22,500.
A main difference now compared to the 2017 bull market, is that institutional investors are jumping into the Bitcoin market, Peters said.
“Three years on, the crypto industry has consolidated, matured and is seeing real traction with institutional investors.
“Institutional investors are using Bitcoin as an inflationary hedge to combat the prospect of continued government stimulus.
“The real question is, when do they stop buying?”
US electronic payments platform PayPal’s decision to allow its customers to pay in Bitcoin has also been seen as positive for Bitcoin’s price.
The supply of Bitcoin is strictly limited to 21 million coins, a level likely to be reached by around 2025, according to current estimates.
There are currently 18.5 million coins in circulation, according to various sources including crypto analysis website Glassnode.
“Data from analytics firm Glassnode shows that demand is far outstripping supply,” said Peters.
“If this supply/demand level continues then we could continue to see substantial price increases,” he added.
During Wednesday’s trading session, Bitcoin had a total market value of $US334bn ($458bn), said Glassnode.
Other crypto market analysts also believe that Bitcoin could easily challenge its previous price highs.
Philip Swift of Lookintobitcoin.com said he expects the price of Bitcoin to touch $US22,000 in “a few weeks”.
This price is around two times its 350-day moving average price, a key technical price level.
Some companies doing well out of the current Bitcoin price rally include Twitter chief executive Jack Dorsey’s company Square which invested $US50m into Bitcoin last month.
Square’s reported purchase of 4,709 Bitcoins, at an average price of $US10,618 in October, would realise a profit of $US37.1m at a price of $US18,500.
Another market insight is the number of long-position holders for Bitcoin – that is, longer than one year – has increased to around 60 per cent.
Some market analysts are skeptical that Bitcoin can maintain its upward price direction.
“The market has extended to the upside, breaking above the trend channel and appears to be entering a blow-out phase,” Equos head of global sales trading, Matt Blom, told Cointelegraph.
He went on to add: “If we drive up to $US19,050 this week, I would expect a pullback to the $US17,000 level.”