Sky The Limit?
Bitcoin is a digital currency created in 2008 following the housing market crash. Bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system known as a blockchain.
On the 12th of March, Bitcoin fell below $4,000 after the S&P Index in the USA saw a sharp decrease. The reason being a need for liquidity, and so, a lot of investors had margin calls in Equity that had to be covered by liquidating other assets like Bitcoins into cash, causing to meet those margin calls elsewhere. However, moving forward to January 2021, the world’s number #1 digital asset trades around $38,000. The reason for this sharp movement being outflow from gold-pegged exchange traded funds, ETFs and inflows into digital-currency like Bitcoin.
Gold v. Bitcoin
Earlier last year gold prices rose to an all-time high of $2,000 which was because gold was considered as a safe haven in such times of volatility used as a hedge against inflation. But with a rise in young investors Bitcoin is now coming to be the new gold, especially considering the price movement it has seen in the last few months. Bitcoins enjoyed a remarkable rise in prices in 2020 compared against other assets including gold. Already Bitcoins are up 12% – 15% so far in 2021, compared against a 3% gain for gold’s price, based on the active gold futures contract, for in January.
Have we reached a ceiling?
“Bitcoin would currently have to rise by 4.6 times from its current market capitalization of around $575 billion — making the number of outstanding coins cost a whopping $146,000” JP Morgan. However, concerns maybe expressed on this number as Bitcoin is perceived to be more complex and riskier to investors as compared to gold and digitalization of gold is also now popular.
Recently apps like PayPal and Coinbase allow users to buy crypto currencies like Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Lite coin which makes it more easily accessible and a user friendly purchase.
Disclaimer: The article is based on personal opinions.