The Wall Street Journal reported on December 28 that according to data from research firm Excalibur Pro Inc., Bitcoin [BTC] has traded with a correlation of 0.84 to gold over the past week. This is not entirely unexpected news, they say, as a lot of investors from traditional markets have put money into the BTC network, and so Bitcoin behaves a traditional asset, albeit a very risky one.
A score of -1 means BTC and gold are perfectly inversely related. A score of +1 indicates a perfect correlation between BTC prices and gold, meaning BTC price climbs when gold prices also increase.
Bitcoin and other cryptocurrencies have always courted money influx from institutions. This backing in research and development of new use cases fuels the growth of the cryptocurrency, both in value and popularity. The Journal cites examples of institutional money like the Bitcoin Investment Trust, sold by Grayscale Investments. All through 2018, Grayscale’s Bitcoin Investment Trust (GBTC) has been worth more than $1B, but dropped below this figure and is now close to $900M. Notably, GBTC is the only stock offered on the stock market whose primary asset is Bitcoin.
The Journal holds the position that Bitcoin’s correlation to traditional markets will only become closer as time progresses. Traditional capital continues to go into cryptocurrency markets, and some cryptocurrencies attempt to attract further institutional backing by conforming to regulations and building services like futures trading. Data from CoinDesk shows that venture capital in the investment and blockchain area has been growing over the years, reports the Wall Street Journal, from $96M in 2013 to an all-time total of over $2B in 2017’s tail.
Bitcoin was dubbed the “digital gold” and believed to be a store of value, much like gold. During the bull run of late 2017, one could be forgiven for thinking that Bitcoin has very little in common with how traditional assets behave and would be an alternate financial system. Yet it had a very troubled year in terms of prices, down almost 80% from peak high in December 2017. As an asset, with money flowing in from traditional investors, it is quite plausible that BTC prices rise and fall in accordance with gold, an established store of value.
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Bitcoin will likely be valued at $100,000 with a market cap of over $2 trillion before the end of 2021
The entire cryptocurrency market seems to be on the brighter side of the market since the beginning of the year. A majority of the coins have recorded significant recoveries from their 2018 slump, a period during which most coins lost over 90 percent of their value, when compared to their all-time highs. Among all the coins in the market, Bitcoin [BTC] aka the digital gold, was noted to be making a massive comeback as the coin breached the $11,000 mark after nearly 15 months. The coin however, soon retracted to settle below the $11,000 level.
According to CoinMarketCap, at press time, Bitcoin was trading at $10,887.27 with a market cap of $93.549 billion. The coin recorded a 24-hour trading volume of $20.757 billion for the past 24 hours and saw a massive rise of over 17 percent over the past seven days.
Anthony Pompliano, Co-founder of Morgan Creek Digital Assets, predicted that the largest digital currency could rise to reach $100,000, before the end of 2021. Pomp added that he was around 70-75 percent confident in this prediction. He stated,
“As I have previously said, making predictions is difficult […] Part of my process as a professional money manager is forming a thesis (price target), identifying a timeline (date), and establishing a confidence level. And then constantly re-evaluating those three aspects of my thought process as I receive new information.”
Pomp however, listed six pointers that have to be understood beforehand. First, this prediction is not an investment advice, and people should do their own research before investing in the digital currency. The second is with respect to Bitcoin’s volatility, with Pomp remarking that since it was a highly volatile market, the coin could witness a significant fall before being valued at $100,000. He stated,
“I anticipate that there will be numerous 20-30% drawdowns from new all-time highs as the asset continues to appreciate in value. These mini-boom/bust cycles should not cause panic, but rather need to be understood as natural market dynamics whenever an asset gains significant value in short periods of time.”
Further, the partner of the investment firm stated that the rise would be driven by several catalysts. This includes institutional adoption, exchange-traded funds and retail product approvals, global instability, governments all across the globe manipulating currencies, markets and economy. He went on to state,
“The market cap of Bitcoin will reach $2+ trillion when Bitcoin is worth $100,000. This is less than 1/3 the market cap of gold and less than 1/40 the global money supply.”
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