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The path of least resistance for bitcoin is on the higher side and the cryptocurrency could more than double from its current value in 2021, according to Bloomberg analysts.
“Bitcoin will maintain its propensity to advance in price in 2021, in our view, with macroeconomics, techniques and demand [versus] supply indicators in support of the target resistance of $ 50,000, implying a market cap of around $ 1 trillion, “Bloomberg Crypto noted in a monthly report.
Supply-demand mechanisms are currently distorted to the upside, as only 900 new coins are mined each day compared to 1,800 in 2017 and institutional participation is increasing.
Notably, assets under management at Grayscale Bitcoin Trust recently broke through the $ 10 billion level, having started the year at $ 2 billion. The trust has bought nearly 70% of the new bitcoins mined since May 11, when the cryptocurrency suffered its third reward halving. Grayscale is owned by Digital Currency Group, which is also the parent company of CoinDesk.
Open interest in bitcoin futures listed on the Chicago Mercantile Exchange rose above $ 1 billion for a record first time from $ 120 million in 2019, according to data source Skew.
Bloomberg analysts said they expect these trends to continue into 2021 because major central banks and governments are unlikely to scale back or stop their stimulus programs for rising inflation anytime soon. Unconventional policies adopted by authorities to counter the coronavirus-induced slowdown have increased the demand for bitcoin and gold this year.
According to Bloomberg, past data also favors a rally to $ 50,000. “The 2017 advance followed a reduction in supply in 2016 to 1,800 coins a day, and similar occurred in 2012-13,” Bloomberg analysts noted.
History seems to repeat itself. Bitcoin’s recent move to a new record high of $ 19,920 came about seven months after the May 11 reward halving. A similar price action took place following the reduction in supply in July 2016.
While the odds seem stacked in favor of the bulls, the cryptocurrency remains vulnerable to a March-like panic sell-off in global equity markets, according to Bloomberg analysts. However, they don’t see the prices drop below $ 10,000.
“The $ 10,000 mark has moved to a critical support level after being the crypto strength mark since 2017,” the report said.
Bitcoin fell sharply to $ 3,867 in March as global equity markets plummeted on fears of a coronavirus-led recession, boosting demand for cash. Prices quickly jumped back to $ 10,000 before the May 11 reward halving.
The highest market value cryptocurrency hit a record high of $ 19,920 earlier this week, surpassing the previous all-time high of $ 19,783 reached in December 2017. Prices have more than doubled in just the past three months.
