Bitcoin is already standing at the top of $28,000, which equates to 180,000 yuan a unit. According to official data, the Tesla Model 3 standard version is $30,000, then there is just about a 10% increase left for 1 Bitcoin for 1 Tesla.
Is Bitcoin rising too much? If you compare Bitcoin to Tesla’s stock performance this year, Bitcoin has only risen 2.7 times, far less than Tesla’s 8.9 times.
A short month ago, when Bitcoin began its breakout from $10,000 and surged to $18,000 with tremendous momentum, I publicly analyzed the top 5 reasons for Bitcoin’s big rise：
First: The DeFi (decentralized finance) boom receded and money returned to mainstream tokens.
Second: Paypal is causing a dramatic increase in the personal transactions of bitcoin, especially by North American users.
Third: Institutions are pouring in to hold bitcoin.
Fourth: A digital currency exchange recently faced significant regulatory risk, the capital hedge back to bitcoin.
The fifth and most important: the continued rapid increase in the issuance of USDT.
And at the time I summarized that “it was only a matter of time before the bitcoin price broke through its all-time high.” Although I was right about the direction, I couldn’t have predicted that bitcoin would be so strong. it not only breaking through the $19,000 all-time high quickly but also standing above $28,000 within a month.
Looking back at the previous top five reasons, the impact of the DeFi tide on bitcoin prices is starting to recede and digital currency exchange regulatory risks are slowly subsiding. Instead, the feverish effect of institutional and individual North American users on bitcoin is becoming more pronounced. And the continued high rate of USDT issuance remains the main driver.
As for whether or not the money release by global central banks has anything to do with this big rise in bitcoin, I think that explanation is too far-fetched. Bitcoin will appreciate in the long run due to the devaluation of fiat currency, but the global central bank money release has been going on for almost a year now. Bitcoin’s recent surge is hardly attributable to fiat currency issuance, but more to USDT issuance. This is because the solid foundation for bitcoin’s surge has been derived from the high rate of USDT issuance, whether it is from actual need or just a fabrication. Printing money always causes prices to rise, and this is very simple to understand, and it applies to cryptocurrencies as well.
Of course, as bitcoin rises, a new phenomenon has emerged: individual investors are watching and not operating, leaving only the short side and the long side, who are leveraged on derivatives, to fight like crazy.
Previously, bitcoin would be discussed all over the cryptocurrency group or communities whenever it broke through an important price point, but now the price surged through $28,000 without smashing a bit of a wave in the group of friends around. In addition to the fact that everyone is used to bitcoin surges, the most important thing is that most individual short- and medium-term investors have already taken profits out of the market, and long-term investors are not willing to sell off due to this upward momentum.
Since individual investors are watching and not operating, all that remains is a fight between long and short individual speculators and investment institutions. On the day when Bitcoin broke through $28,000, there were reportedly 3.8 billion short sellers across the network who blew their positions, and the backfill after the blowout further drove the price up.
Bitcoin has now entered a highly volatile and irrational space, called the “enthusiasm phase” of the bubble development stage.
If you compare the graphs of the bitcoin spike in 2017 and 2020, you will find that they are extremely similar and both match the graphs of the bubble enthusiasm period. The only difference between 2020 and 2017 is that compared to 3 years ago, bitcoin leverage and derivatives are now very popular, which magnifies the upside and downside of bitcoin, and the volatility is exponentially higher, making it a very risky investment.
Some people are saying, “ Is it impossible to see bitcoin under $20,000 anymore?” Well, it’s not. Bitcoin is an investment that lacks a value anchor, so any price is possible. But when the price changes to the desired range, many people are timid, and when it really drops to $20,000, many people won’t be brave enough to buy. For example, bitcoin fell to around $3,000 in March this year, then how many people were willing to buy it?
In fact, we should be asking “Where is the value of Bitcoin?” If we can find its anchor value, then investors will have the courage to buy when the price is far below value and sell when the price is far above value. However, finding out the value of Bitcoin is a puzzle that both academics and the industry are exploring but still have no answer to. Without a value anchor, bitcoin is ultimately an investment with an extremely volatile price range, which is perhaps what makes it so unique.
Article from Cai Kailong
Translated by Yang(Mengyan Finance)