Bitcoin has been on a tear in 2021. Being roughly 80% up since the start of the year, this first quarter has been bitcoin’s best one in the last eight years. Bitcoin started the new year at around $29,000 and quick flew by $30k, $40k, $50k and $60k. While critics talk about “bubbles”, “tulips” and “no intrinsic value”, If history is any indication, we should expect bitcoin to continue to run well past the six figures mark. Last year we had bitcoin’s halving and these events create a disequilibrium in the supply and demand dynamics. In March 2019, Plan B, a pseudonymous Twitter user, released a model that quantified the relationship between the relative scarcity of bitcoin and the price. He found there was quite a significant correlation between the stock-to-flow ratio of bitcoin, and the price action of the asset. The model predicts a rise to $100,000-plus in 2021, but in my opinion, it’s going to go all the way to $200,000 and beyond in 2021. This time around things are fundamentally different. In this halving cycle we’ve seen a huge monetary debasement in world of central banks. But beyond price models there is hard data that reaffirms everything. Let’s quickly review what’s happened in the last three months.
Ilias Louis Hatzis is the founder and CEO at Kryptonio wallet.
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Institutional investors continued to enter crypto in Q1 2021, although many have done so relatively quietly compared to Q4 2020. The new wave of institutional interest helped push bitcoin’s (BTC) price past $50K in February, then past $60K in March. The biggest news came in February when Tesla announced a $1.5 billion purchase of BTC.
BTC price gains 103% in Q1
BTC/USD gained more in the first three months of this year than any since 2013 and also posted its highest price in history of $61,700.
Number of daily Bitcoin transactions
The number of Bitcoins processed on a single day reached its highest value at the beginning of 2021, as more people displayed interest in the cryptocurrency. Bitcoin around 330,000 daily transactions in December 2020, reaching around 400,000 in early January 2021.
A bitcoin ETF?
In the first quarter of 2021 we had the successful launch of three bitcoin ETFs on the Toronto Stock Exchange and the OTC price of Grayscale’s bitcoin trust* trade at a discount to NAV. This is increasing the pressure on the SEC to approve a US traded bitcoin ETF.
BTC Address growth
The bitcoin network added over 4 million new addresses in Q1 a growth of over 12% which highlights the growing speed of the network.
Venture capital investments
According to data from CB Insights, 129 blockchain companies received $2.6 billion in investments during Q1 2021. The figure is already greater than that in the previous full year, wherein blockchain firms secured $2.3 billion in 341 deals. Dapper Labs received $305 million in funding, that put the startup’s valuation at a staggering $2.6 billion. London-based Blockchain.com announced that it had raised $300 million in its Series C round of funding, which put the company’s valuation at $5.2 billion. And a few days ago, Coinbase announced that the SEC declared their S-1 registration statement effective and expect their direct listing to occur on April 14, 2021, with their Class A common stock trading on the NASDAQ under the ticker symbol COIN.
There are some things that happened in the last ninety days, but I singled out three events that I think were important.
- The Bank of New York Mellon (BNY Mellon) , which is the oldest bank in the US, announced that going to allow asset management clients to hold, transfer and issue bitcoin, along with other cryptocurrencies.
- The mayor of Miami, Francis Suarez announces that he wants to offer the option to pay municipal works, collect taxes in bitcoin and investing a portion of government funds in bitcoin.
- Apple Pay users can now use bitcoin to make payments
The second quarter of each year has historically been the strongest for Bitcoin. Only two years in Bitcoin’s life have we seen negative returns, with both minimal declines in trading values. Two years ago, Bitcoin’s second quarter saw nearly 160% returns in the green, a value we’re all hopping this year will be even better.
As Bitcoin’s price continues to hold strong, some suggest that the bull run is not over, and that the cryptocurrency price will see another surge. PlanB’s stock-to-flow price models call for an average price of either $100,000 or $288,000 in this halving cycle. From where I stand the former looks like it’s too conservative.
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