Three Things Keeping Bitcoin Up
Today we discuss three significant factors helping to keep the price of BTC well above the psychologically important $10k mark. Even at $13k a coin, bitcoin could still be relatively cheap if the market inspires even more buyers in the near future, which we believe is an actual certainty.
As we approach the end of a particularly busy year, the price of bitcoin was still one of the more exciting things to watch, with the spirit of the late 2017 rally lifting BTC to prices not seen since June 2019. After taking a COVID-inspired shake of confidence in mid-March, in which prices plummeted briefly into the $4,000s, BTC has since been on a massive comeback, shaking off the losses and doing much, much more. Interestingly, most altcoins aren’t faring nearly as well, signifying these rises are specific to the inherent features of Bitcoin.
There are many elements that have contributed to the enduring success of Bitcoin over the years, but today we’ll be discussing three of the biggest and most current of them in an attempt to explain why they signal things are looking up for Bitcoin, and by extension, cryptocurrency in general. As of the end of October, it would appear BTC at the very least has formed a strong floor north of $10,000 per coin. Here are a few of the main reasons contributing to its rise:
#1: PayPal Rolling Out Crypto Management and Investment Options
PayPal was long considered by the community to be something of a rival to Bitcoin whose transaction figures and market capitalization were benchmarks on the road to mainstream adoption. On October 21st, the payment processing giant announced that they would begin supporting crypto payments in “early 2021.” A few days later there was a rollout of a crypto purchasing option built into the wallets of residents from certain states.
The news inspired what was easily one of BTC’s biggest and most important gains of 2020, lifting the price of PayPal stock (PYPL) to all-time highs along with it.
Those with access to the option found they could easily convert their PayPal balance from fiat currency to one of 5 cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH). For the initial part of the rollout, PayPal’s crypto holders won’t be able to transfer their holdings off-site, which has prompted some criticism among the crypto community; notably those who champion the wisdom behind the phrase, “not your keys, not your bitcoin.”
The PayPal news is good not only from the perspective of a cryptocurrency investor, but from the perspective of sideliners who were looking for a way to get introduced to cryptocurrency but were unsure how to do so. The move has the potential to attract millions of more eyes to crypto, perhaps Among PayPal’s pilot program are PayPal account holders from the state of New York, where the $225 billion company possesses the coveted state BitLicense.
— Jeremy Allaire (@jerallaire) October 28, 2020
#2: MicroStrategy Bitcoin Investment Already Paying Dividends
On October 5th, the publicly-traded data analytics software company MicroStrategy announced it was investing the “major chunk” of its cash savings into bitcoin. In all, the company poured about $425 million into bitcoin, purchasing a total of 38,250 BTC at an average price of $11,111 per coin. At today’s price of about $13,500, MicroStrategy first-of-its-kind investment by a major corporation has already yielded a return of 21.5%, or $91 million dollars. This has proven to be a bigger profit for the company than its last three years of net income, combined.
In the days since MicroStrategy’s acquisition, CEO Michael Saylor has become a Bitcoin Twitter Evangelist, championing the benefits of bitcoin via series of powerful tweets on an almost daily basis.
Some have asked how much #BTC I own. I personally #hodl 17,732 BTC which I bought at $9,882 each on average. I informed MicroStrategy of these holdings before the company decided to buy #bitcoin for itself.
— Michael Saylor (@michael_saylor) October 28, 2020
While it’s definitely nice to have Saylor on board as a bitcoin cheerleader and poster child, the real reason why MicroStrategy’s massive BTC purchase is highly bullish is because it is proving to be a viable asset for massive investments by NASDAQ-listed companies. Scared by the economic fallout caused by COVID-19, several major corporations – including banks, financial services and tech companies – are currently seeking to park large amounts of cash in asset classes predicted to hold or increase in value in an inflationary environment.
MicroStrategy’s pioneering move will in all likelihood soon be copied by similarly-sized companies, if it is not happening already. This means that the number of large-scale buyers of BTC is likely on the rise, whose purchases will keep prices above $10k well into the foreseeable future.
Last three months in Bitcoin:
-MicroStrategy buys $425m in Bitcoin
-Square buys $50m in Bitcoin
-Stone Ridge buys $110m in Bitcoin
-PayPal integrates crypto purchases
-JPMorgan writes about Bitcoin vs Gold competition
-DBS soft launches crypto exchange
— Joseph Young (@iamjosephyoung) October 27, 2020
#3: Second Round of Stimulus for Americans on the Horizon
In mid March, coronavirus jitters rattled the stock market, taking down the price of bitcoin with it. By the end of the month, congress had passed a $2.2 trillion relief bill known as the CARES Act. In the bill was $250 billion for emergency small business loans, along with billions more in checks of $1200 to all citizens meeting its basic requirements.
In addition to providing direct financial relief – some of which inevitably found its way into bitcoin – the CARES Act benefits bitcoin in a roundabout way: it highlights the need for a non-inflationary store of value. With the Federal Reserve printing funds faster than ever seen in the history of America, there are bound to be negative consequences waiting to play out; namely an inevitable inflationary period in which prices for basic goods and services skyrocket and become out of reach for the lower and middle classes.
— Raider ₿ 🛰 (@TruthRaiderHQ) May 11, 2020
While the government has access to “unlimited funds” and can print up any amount of money at any time, the amount of bitcoin in circulation and ever to be mined will always remain constant. This assures that its value cannot be diminished via inflation, unexpected or otherwise. As dollars become less useful – almost a challenge to hold in the face of incoming inflation – investors begin to look for stores of value that are likely to increase in dollar valuation. Ideally, this increase occurs at a rate that at least offsets the decreasing value of the dollar.
Basically, a second round of stimulus would provide both “benefits” to the price of BTC once again, direct and indirect. Stocks are already at incredibly high valuations; at least a sliver of a second stimulus bill finding its way into bitcoin is all it takes to blast prices well past all-time highs. For as long as it’s been a trade-able asset, bitcoin has been the single greatest hedge against fiat currency ever known to man.
$1200 turned into $2,040 (69%) if you invested in #Bitcoin
— Wizard Doom (@WizardDoom) October 17, 2020
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