What to expect in this article?
- Our views on why a $20,000 is not only possible but inevitable
- Our broad views on why this inevitability may never happen!
Market crashed 50% and people lost their shirts in the market. Not just those that directly participated in the speculative market but those who took part through indirect mediums like retirement accounts.
That is not the story of crypto investors, although crypto investors have seen worse, that 50% drop in value was in the traditional stock market. The good old 401(k) investments lost close to 40% in their value during the 2008 crash.
According to some studies, people are still recovering from the 401(k) losses from the crash of 2008.
The US Stock market has been breaking one record after the other and has not seen a meaningful correction for close to 12 years now.
Many studies and financial gurus are warning that a crash is coming and it will be nastier than the last one.
Naturally, people are looking to move their money from the stock market and onto safe havens. Gold used to be the safest asset to hold during a crisis, however, things have changed a lot since the last financial meltdown.
Now people have alternative asset class to consider: cryptocurrency. More specifically, Bitcoin.
The crash that cryptocurrency market experienced since 2017 peak of $20,000 to the low $3000s in 2018, people were naturally apprehensive about the space.
Now with bitcoin valuation of over $9000 per coin, the question started to linger in the space ‘will we ever see $20,000 Bitcoin again?’
Of course, no one knows for sure.
Some speculate that Bitcoin’s price will be a lot higher than $20,000 and while some write it off as having seen its best days in 2017.
In this article, we will look at factors that support a $20,000 or more per bitcoin and factors that support a contrary view point.
Why a 20K bitcoin is easy!
How would you like to own a piece of history? Better yet, a piece of history on which all of tomorrow will be built on? And what if I told you that you will probably be among the .0024% if you owned a full piece of that history? Wouldn’t that make owning this piece even more special? That is what we are dealing with when it comes to Bitcoin. It is born from the ashes of 2008 crash and has emerged into a powerful phoenix that is well on its way to shake up the financial systems across the world. If nothing, this genesis factor will always work in favor of Bitcoin’s price as store(y) of value and an antique from the future.
Moving from the sentimental aspect to a more ‘hard nosed’ logic. In an interview by Max Keiser with Mark Yusko of Morgan Creek Capital, Mark states “So the idea that ten years from now we won’t look back and say that as a fiduciary of a pension fund, sovereign wealth, family office, etc. you had to have exposure to this asset, is crazy.”
“Bitcoin may potentially increase portfolio diversification because of its low correlation to traditional asset classes, including broad market equity indices, bonds and gold,” observes another investment outlook by VanEck titled “The Investment Case for Bitcoin.”
Coincidentally, both of these viewpoints look at how 1% exposure to bitcoin drastically changes the portfolio performance because bitcoin is considered non-correlated (meaning, it doesn’t act in concert with market factors). Academic studies support this diversification model, including a Yale Study that recommended 6%. We delved into the question: ‘Should I invest in Cryptocurrency?’ referencing this study.
Bitcon is not only limited, it gets scarce by each passing year. The halving (reduction of number of bitcoins that can be mined per block) has always triggered a rally in bitcoin’s prices. Many industry experts expect a similar action in 2020. VanEck’s study notes “Given the scarcity induced by halvings, the price of bitcoin has historically increased following halvings.”
According to some, almost 4 Million Bitcoins are lost forever. That means, the practical total supply will always hover around 17 Million.
Store of value
Millennials prefer Bitcoin over gold. And Millennials are a major part of the workforce. Whenever the working class backs a particular asset, it continues to gain momentum. With Bitcoin, Millennials look to it as a store of value. Big name investment companies, like Fidelity, are giving the option to invest in bitcoin related investments to millennials based on the interest in this asset class. There are many reasons why Bitcoin is better store of value than gold. You can read them here in the article titled “Top 10 reasons why Bitcoin is better than gold.”
Endorsement from leaders
“It looks like it will be something like six months to a year after the halvening that we will cross $250,000 per bitcoin…it is pretty likely we are going to hit $250,000 by the end of 2022 or early 2023.” That exorbitant price goal is not from some Bitcoin fanatics. That prediction comes directly from Tim Draper, who has made over 200 Million on Bitcoin and has successfully invested in projects like Baidu, Tesla, Skype, etc., “Bitcoin is the place to invest your money if you’re a millennial”, billionaire investor Tim Draper told Fox Business.
It is not just Tim Draper who has been advocating bitcoin as an investment of choice for the future, Jack Dorsey, CEO of Twitter, who is not only advocating Bitcoin as a better investment, he is using his resources to make bitcoin one of the best investment assets and best technology out there. His team is working on Lightning Development Kit to accelerate payments and lower the fees while scaling bitcoin platform for mass transactions.
When people who know the business of business and technology behind technology back bitcoin, it naturally validates Bitcoin’s value.
Halving is the big elephant in the room, we cannot not talk about it when we talk about price prediction for Bitcoin. Each time bitcoin went through the halving cycle, its price saw a moonshot. Tim Draper expects that the 2020 halving should take Bitcoin to $250,000 as early as 2022. Some argue that the current price already factors the impact of Halving while many bitcoin veterans disagree. What will this halving do to bitcoin’s price? If Tim Draper says $250K is feasible, then the $20,000 seems like an easy milestone to surpass!
Innovations coming to Bitcoin
Many brilliant minds are working with bitcoin to bring many more innovations to the platform. And the traditional investment giants are looking to bring more liquidity to Bitcoin.
- RSK is bringing smart contracts to bitcoin
- Bakkt brought Bitcoin options and Cash Settled Futures
- Lightning Network is expected to bring scalability, instant payments, lower cost and cross blockchain transaction capability onto Bitcoin
- Fidelity Digital Assets is building enterprise-grade bitcoin custody and other services for large institutions.
The glowing endorsements, evolving technology, halving, emergence of Bitcoin as store of value and scarcity, all work in Bitcoin’s favor to support and surpass the $20,000 highs.
Why bitcoin may lose its base and never see $20,000 glory?
Getting off the bitcoin high-horse for a minute here, let us now examine the factors that could thwart bitcoin’s attempt to reach/cross the $20,000 threshold.
Central bank digital currency – specifically Digital US Dollar
Leaving the world of crypto fans and bitcoin maximalists, which doesn’t even constitute 1% of the populace, the rest of the world is blissfully oblivious to Bitcoin and its offshoot cryptocurrencies. This means, when the US Government comes up with its own Digital Dollar backed by Government guarantee (whatever that means in the fiat world), the general public will happily accept it without ever touching the bitcoin and crypto world. This could seriously undermine the Bitcoin’s progress in terms of its adoption in the world (although it may not dent the ‘store of value’ aspect).
Accenture is already part of Digital Dollar Initiative to study the feasibility of a digital dollar.
Government’s have a lot to gain including keeping track of every dollar ever created/spent, citizen financial behavior and elimination of counterfeit.
Given the numerous benefits it presents, we could soon see a Digital Dollar based on Blockchain technology backed by the US Government.
Some industry experts claim this to be the ‘kiss of death’ for bitcoin.
While others point to the fact that whether fiat wears the mask of ‘digital dollar’ or it stays as a digit in our bank accounts – the fact that it has no upper ceiling will always keep it inferior to Bitcoin and cryptocurrency as a whole.
Who is right? Only time will tell.
While we don’t like Ripple – it has been slowly encroaching into Bitcoin’s dominance as the trading pair on many exchanges. Along with Ripple, Ethereum, USDT, USDC, etc., have all been added as trading pairs on many exchanges. While being trading pair is not the whole value proposition of Bitcoin, if it continues to lose its dominance as the trading pair on major exchanges, then in theory, it should reduce the demand pressure on bitcoin’s availability. This could have a negative impact on
Sentiment shift to a fork
At one point, Bitcoin Cash threatened to take the dominance of Bitcoin as the king of cryptocurrencies. Then Bitcoin SV gained popularity. Every time a bitcoin fork claims technological superiority – people panic.
There is no way for anyone to predict if Bitcoin will always maintain its dominance or if a future fork will actually become the better version of Bitcoin to claim the throne? If that happens, what happens to the value of BTC? And will that crash the bitcoin prices to the oblivion?
We have to wait and see. For now, Bitcoin maximalists maintain that Bitcoin will always remain the king of cryptos.
Personally, we side with Tim Draper and Jack Dorsey when it comes to Bitcoin, and in our opinion we will not only see a $20,000 per bitcoin – it will be but just a small milestone in the many milestones that bitcoin will break in the coming decade.
Take our opinion as you like it, but there it is.
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