As bitcoin burst by way of $16 500 this week and with $17 000 now in sight, the euphoria of 2017 – when it briefly hit $20 000 – has returned with a vengeance.
A weaker US greenback index and expectations of additional financial stimulus to prop up ailing economies around the globe are behind the most recent price surge within the benchmark cryptocurrency.
In a latest report entitled Bitcoin: 21st Century Gold, Citibank MD Tom Fitzpatrick notes some unmistakable similarities between the 1970 gold market and bitcoin. When former US President Richard Nixon abolished the gold commonplace in 1971, the greenback devalued and gold surged.
“Bitcoin’s transfer occurred within the aftermath of the Nice Monetary disaster (of 2008) which noticed a brand new change within the financial regime as we went to zero p.c rates of interest,” says Fitzpatrick.
Governments in the present day have responded to the Covid disaster with large financial stimuli, creating an setting just like gold within the 1970s. Fitzpatrick, who labored at Nedbank in Johannesburg within the 1980s earlier than rising by way of the ranks at Citibank, sees bitcoin at $318 000 by the tip of 2021, and gold between $4 000 and $8 000 an oz.
However loads can occur earlier than then – and two developments may spoil the social gathering.
First, information that US biotech agency Moderna has achieved 94.5% effectivity in its Covid vaccine trials and the probability of an imminent return to one thing approaching the ‘old normal’.
Second, a drop within the variety of energetic addresses interacting with the community. This can be a sign that holders are buying and selling moderately than holding their bitcoin, although it doesn’t essentially imply they’re making ready to promote.
The information of one other attainable Covid vaccine from Moderna comes barely per week after Pfizer introduced its vaccine had achieved success charges of 90% in trials. The Pfizer announcement was accompanied by a pointy, although short-lived, drop within the bitcoin price on the presumption that such a growth meant that fears over the pandemic may begin to fade and this may profit the world financial system and the US greenback. The Moderna announcement had no such impact, with bitcoin surging in the direction of $17 000.
In line with analytics agency Santiment, the variety of energetic addresses hit a 33-month excessive two weeks in the past, the most important since January 2018 earlier than bitcoin crashed by 85% after its large spike to $20 000 in December 2017.
Learn: Bitcoin is the bubble that retains on giving
Comparisons have been made between bitcoin and the dotcom bubble that got here crashing down within the early 2000s. Out of that crash got here Fb, Amazon and different tech giants.
However bitcoin has simply emerged from a significant crash that started in early 2018 and resulted in 2019. It’s vulnerable to risky swings, and is due for a correction after its wonderful run in 2020.
However not everyone seems to be satisfied the present bull market is anyplace close to operating out of steam, Citibank amongst them.
Bitcoin tore by way of resistance ranges at $15 700 in latest weeks and will see assist constructing at this degree because it makes a push for its earlier excessive at $20 000.
Learn: Bitcoin getting ready to recent yr excessive following PayPal embrace
The election fiasco within the US has added to the final sense of uncertainty, with sentiment remaining firmly with secure haven property similar to gold and bitcoin.
This would possibly immediate disbelief amongst extra typical analysts, however Citibank’s Fitzpatrick notes that bitcoin has been in an ascending parallel channel since 2013.
He writes: “You look at price action being much more symmetrical or so over the past seven years forming what looks like a very well defined channel giving us an up move of similar timeframe to the last rally [in 2017].”