Many investors probably looked a bit incredulous when Bitcoin revisited the $20,000 mark in December 2020. BTC took a total of 3 years to revisit the old all-time high, and it only took a few days to reach a new all-time high.
Right now, the bitcoin price is in a correction after a fabulous rise to just over $24,000. But how did this happen and why did it take so long? In today's article, we get to the bottom of what led to this price rally in recent weeks.
Market cycles are repeating
Bitcoin has a long history of different cycles that the market goes through again and again, marking a new all-time high at their respective peaks. This is followed by a year-long correction that finds its final low on average at around -80% from the previous all-time high.
The first cycle peaked in 2013, when the Bitcoin price reached 1300 US dollars on some trading venues. After that, it first went steeply downward and then only sideways for a long time before BTC finally reached the old record again in 2016.
The following year, 2017, saw the brilliant rally that peaked just below 20,000 US dollars. After that, a long correction followed and so the circle is closed and we are on the threshold of the next bull market, which is expected in 2021.
Institutional investors invest massively
While these observations are true, it is not necessarily possible to predict from past price action how BTC will behave in future. One observation can be made, however, and that is the growing interest in Bitcoin by institutional investors.
In the meantime, MicroStrategy has invested over 1 billion US dollars in Bitcoin and Elon Musk also flirted with the idea of betting on Bitcoin via Twitter. But a $100 million investment by MassMutual also openly puts up for debate whether an influx of insurers and pension funds will soon bet on BTC.
This buying interest was the driving factor behind the price rally in 2020, and many experts agree that this effect could extend in 2021. Here, everyone also agrees that Bitcoin's mathematically assured scarcity is the driving factor behind the interest. This manifests the idea that Bitcoin is first and foremost a digital store of value that is highly speculative but has better overall properties than gold.