The crazy year 2020 against the background of the dollar crisis led to a feverish growth of not only the oldest protective asset – gold. Shot also the youngest currency – Bitcoin. Investors have decided to wait for the economic cataclysms of the planet in this very crypt currency. But what dangers does it conceal in itself?
Bitcoin updates the historical maximum to the ruble. Its value has increased to 1.22 million rubles per coin (at the dollar rate of 77.4 rubles). This is 3% higher than the record coin price in December 2017, when Bitcoin was worth 20 thousand dollars. At that time the rate was 59 rubles per dollar, so the coin cost 1.18 million rubles.
The crypt currency has been showing significant growth for two consecutive days. On Thursday, Bitcoin exceeded the mark of 15 thousand dollars (for the first time since January 2018), and on Friday, November 6, rose in price to 15.8 thousand dollars. Since the beginning of the year bitcoin in dollars rose by 115%, and in rubles by as much as 175%. This gap is explained by the devaluation of the Russian currency against the American one.
At the same time, bitcoin in dollars has a lot to strive for, as the maximum level is not yet broken (it is higher by almost a third). And experts are optimistic: the coin can not only grow to 20 thousand dollars but also take off at times higher.
Why has such popularity returned to Bitcoin? The coin was fired against the background of a pandemic, growing morbidity, and uncertainty in the global economy. In fact, Bitcoin, along with gold, acted as a protective asset. “Against the background of general instability, investors started looking for assets of a “safe haven” – gold and bitcoin became them. Private investors, institutional investors (banks, funds), heads of major companies are also actively investing in the crypto market,” said Artem Tuzov, Executive Director of Capital Market Department of Universal Capital IC.
In such a nervous situation the growth leaders among all asset classes have found gold – it is a historically traditional protective asset during the crisis. And it was joined by a relatively new currency – Bitcoin and IT-sector companies.
Bitcoin growth in 2020 was largely triggered by a massive money emission from central banks in developed countries to help the economy and citizens during the global quarantine, says Alexander Yanyuk, finance expert at CEX.IO Broker. The attempt to “fill” economic problems with money has led to the blossoming of a new currency.
“This monetary policy has had a negative impact on the rate of most freely convertible currencies, such as the British pound and the U.S. dollar. In this situation, many investors and companies considered Bitcoin as an ideal tool to protect against inflation, as its emission is strictly limited,” explains Janyuk.
One part of investors are trying to escape inflation, while another part is trying to find refuge in Bitcoin because of fears about the depreciation of the dollar, euro and other currencies, said Alexander Kuptsikevich, a leading analyst at FxPro.
Bitcoin’s sharp jump against the dollar in the past two days is explained by the presidential election in the United States. The coin is growing in price thanks to Democrat Joe Biden, whose official victory seems to have been only a matter of time.
“A democratic candidate’s victory promises a softer economic policy and more measures to support the U.S. economy and consumer demand than would be expected from a Republican president and his administration. And this will put even more pressure on the dollar. That’s why the BTC/USD rate automatically reacted with growth to the outcome of the U.S. presidential election,” Yanyuk said.
Experts believe that Bitcoin has all chances to set new records. In the future, it is quite possible to expect growth to 16 thousand dollars per coin – until the end of the year, and in 2021 is projected to grow to 30-45 thousand dollars per bitcoin, says Artem Tuzov.
Janyuk says – one can expect that the BTC coin price will reach $18 thousand by the end of 2020.
And Kuptsikevich doesn’t rule out that Bitcoin will rewrite historical highs of $20 thousand by the end of the year. “Now there is a noticeable repetition of the hippe that was at the end of 2017. A sharp growth has just begun. And in a matter of months, the inflation of the bubble may bring the price up to 40 thousand or even higher,” he does not rule out.
However, you have to be very careful with this currency. “It may well turn out that in a year’s time a bitcoin will cost the same amount as it does now. A wave of growth is often followed by a prolonged decline. Reaching new historical highs and stopping it is likely to trigger a huge wave of profit-taking by long-term investors who have been at Bitcoin since 2017. Investors in Bitcoin are very easily excited, but also quickly disappointed,” explains Kuptsikevich.
An instructive story of 2017, when the price of Bitcoin soared sharply – from September to December six times from 3.8 thousand to 20 thousand dollars. However, by February 2014 the rate of bitcoin collapsed to 6 thousand dollars, and after a long time was under pressure from sellers.
“It is difficult to consider Bitcoin a reliable investment “bought and forgotten,” there is a risk for many years to be in the negative. This is a very hip tool for situational trading, which is not suitable for everyone: you need to keep your hand on the pulse and be ready for any development, and very unexpected,” – said Kuptsikevich. If we evaluate the growth or decline options, we can say that the chances are 50/50, adds Ace.
We should understand that bitcoin is not a protective asset after all. “First, the price is very volatile. Now it is growing by tens of percent in a couple of weeks, but it can also fall quickly. We saw this in March when Bitcoin depreciated by two-thirds in a matter of days. Bitcoin, like gold, grows best when the economy gets out of the pit and the monetary policy is still soft. But they can collapse in price during the turbulence of financial markets,” Kuptsikiewicz warns.