Reasons why the price of Bitcoin should return $ 34,000 this week
The price of Bitcoin has fallen by more than 16 percent on Monday, hitting an intraday low of $ 27,678 as a buyer stepped in and the price of BTC bounced and climbed above the $30K level.
Reasons why Bitcoin will continue its growth
Rapid recovery to about $ 32,800 is an important reminder of why the ongoing Bitcoin price rally is completely different from the one that led to a complete price collapse in December 2017. Bitcoin surged from $ 3,858 in March to $ 34,810. in January 2021. After yesterday’s cryptocurrency sell-off, a new wave of buyers immediately absorbed the selling pressure, which is a good sign that BTC will continue to grow in 2021.
While the selling pressure from the BTC whales appears to have caused a short-term price collapse, there are still three reasons why Bitcoin should continue to test new historical highs after this period of consolidation.
- Institutional Money for Bitcoin
The narrative of institutional adoption of BTC has been prevalent, especially in the second half of 2020, when firms such as MicroStrategy took the initiative to make Bitcoin a reserve hedge asset, eventually buying it for more than $ 1 billion for their coffers.
Institutions have flocked to Bitcoin, and in the last 24 hours alone, two more major financial companies have confirmed their presence in the BTC market. Singapore-based investment fund Three Arrows Capital has reported a significant increase in its position in Grayscale Bitcoin Trust (GBTC) Grayscale Investments and now owns 38,888,888 shares. At the time of writing, this position was valued at just over $ 1.3 billion
- The fall of the dollar and the minutes of the FOMC meeting
Bitcoin is now trading inversely to the US dollar as the dollar continues to lose purchasing power due to excessive money printing incentives.
At the end of 2020, the dollar closed nearly 7 percent lower against a basket of major foreign currencies, while Bitcoin rose more than 300 percent. The bearish outlook for the dollar, which opened in negative territory in 2021, is causing a surge in investment in alternative and emerging market currencies.
Bitcoin served as a hedge against lower bond yields and the devaluation of the US currency. The cryptocurrency is likely to continue to perform its “anti-inflationary” function, as analysts expect a further decline in the dollar.
Bitcoin’s ability to maintain its bullish narrative may depend on further guidance from the Federal Reserve. The Central Bank of the United States is due to release the minutes of its December meeting on January 6. Federal Reserve Chairman Jerome Powell has already said that the Fed will continue to channel cash into financial markets to avoid a deeper economic recession.
The Fed’s guidance should probably push Bitcoin bulls to return the BTC price above $ 34,000 by the end of the week.
- JPMorgan: public demand for PTS compared to gold may lead to the achievement of the BTC price target of $ 146,000
Leading US bank JPMorgan Chase & Co. believes that this uptrend of BTC could be the tip of the iceberg in the long run, if the leading cryptocurrency can continue to take market share and public support away from traditional gold safe-haven assets.
But the crypto asset faces a difficult task. JPMorgan strategists noted that BTC will have to increase its current market capitalization of about $ 575 billion by 4.6 times to reach a theoretical price of $ 146 thousand. Thus, it will correspond to the total amount of private sector investment in gold in the form of bullion and coins or exchange-traded funds.
Strategists led by Nikolaos Panigirtzoglou recognized:
“The displacement of gold as an ‘alternative’ currency implies a large growth potential for Bitcoin in the long term”.
They noted, however, that the volatility between BTC and gold cannot converge in the short term, so the target price of $ 146,000 in 2021 was not reached.
JPMorgan believes that if BTC continues to gain a foothold as a hedge against inflation, it could displace gold by increasing investment flows into the leading cryptocurrency.