Tags: Crypto
bitcoin

Reasons why Bitcoin hit an all-time high – $41,940

According to Henri Arslanian, PwC’s global crypto leader, the giant institutional investors’ entry into the market drove the rally of Bitcoin seen in the last weeks.

The world’s dominant cryptocurrency increased to a lifetime high of $41,940 for the first time on January 8. It had raised over 300% in 2020.

Bitcoin has been around for a little over a decade. However, it only started to surge in popularity among mainstream institutional investors in 2020. Crypto bulls have stated that Bitcoin is a hedge against inflation like gold.

According to Arslanian, two big elements drive the Bitcoin rally in the last couple of weeks and months. One is the constant entry of institutional investors.

Well-known Wall Street billionaires publicly backed the cryptocurrency. Hence, the dominant cryptocurrency’s price resurged in 2020. Analysts stated their support gave confidence to skeptical, mainstream investors. Investors such as Paul Tudor Jones and Stanley Druckenmiller have invested in Bitcoin and pointed out its potential as an inflation hedge.

Big financial companies like PayPal and Fidelity have also invested in Bitcoin. Besides, Square and MicroStrategy have used their balance sheets to get Bitcoin.

Arslanian announced he anticipates that trend to continue over the following months, pointing out that there are different instruments now that allow institutional players to get exposed to Bitcoin. He added that there are many regulated players, which was not the case a few years ago.

Analysts say the rally is different from 2018

According to Arslanian, a second development driving the current Bitcoin rally is retail investors and their fear of missing out. He stated many people today have accounts on crypto exchanges than before, as buying cryptocurrencies is easier than before. Arslanian announced that there is much optimism in the cryptocurrency markets.

In 2017, the digital cryptocurrency hit $20,000, followed by a sharp pullback in 2018. Hence it wiped out billions of dollars in the market cap of leading cryptocurrencies. However, analysts say that the current rally is different as it is driven by institutional buying rather than retail speculation.

Etherum also witnessed substantial gains and hit $1,439 on December 19, up by 12%. That is a little over the previous lifetime high of $1,432.99

On December 20, the price of dominant cryptocurrency declined by 7.4% to $35,000. The previous session stood at $37,800, liquidating $572 million worth of cryptocurrency futures positions.

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