Exactly three years to the day of the previous record, the value of the world’s first cryptocurrency skyrocketed to around 4.5 times what it was worth in March this year.
Only weeks ago, before this latest price explosion, experts were discussing the real possibility of Bitcoin hitting the $100,000 mark. Many thought this ridiculous but things are changing quickly.
The cryptocurrency marketplace is also undergoing change. In London, the finance watchdog the Financial Conduct Authority is to usher in a ban on selling derivatives based on virtual currencies after the new year.
Sheldon Mills, interim executive director of strategy and competition at the FCA, told the media:
"Significant price volatility, combined with the inherent difficulties of valuing crypto assets reliably, places retail consumers at a high risk of suffering losses from trading crypto derivatives.”
Time will tell if this decision sparks a trend of clamping down on the whole industry, which ultimately will negatively affect the prices.
Is $100k Realistic?
Pseudonymous analyst PlanB, the creator of the stock-to-flow (S2F) model, expects Bitcoin’s value to end 2021 in the $100,000 to $288,000 range. Ambitious to say the least. If this does come to pass it is likely that the market capitalisation of Bitcoin will exceed that of the world’s most valuable companies. Even now it is equivalent to the 18th largest commercial company in the US. This would be a huge paradigm change.
The stock-to-flow model was created to analyse the long-term price trend of Bitcoin by evaluating the supply. The model takes into account what is known as block reward halving which periodically reduces the rate that Bitcoin miners can produce the currency.
In theory, as the supply decreases, inflation will increase continuously. As both factors apply at the same time we can expect to see the value of Bitcoin uptrending massively. The model predicts that by the end of 2024 the Bitcoin market will be worth an eye-watering $5.5 trillion.
There are still skeptics but many experts are now getting on board with these predictions. In May 2020 there was the third ever block reward halving which decreased the supply available each day by half. Industry insiders say this makes 2021 an important year for understanding just where Bitcoin is heading in the medium-long term.
Coinbase Files for Public Listing
Leading cryptocurrency wallet Coinbase looks keen not to miss a trick while confidence in the industry is at an all-time high. Last week news broke that they had filed with the US regulators to take the company public. This is a ground-breaking move that will raise the bar when it comes to legitimacy.
Many still see the cryptocurrency sector as a flash in the pan that isn’t taken seriously by the financial industry. Tiger Global Management recently valued Coinbase as being worth $8 billion, which should lend more than a little credence towards how serious this market is.
In October 2020 Paypal announced that they plan to support cryptocurrencies in the near future. If that isn’t a mark of seriousness then we don’t know what is.
