Grayscale Investments, one of the leading cryptocurrency fund managers, believes that the position of Bitcoin currently is surprisingly similar to its position in 2016, just before it went on a ground-shattering bull run. The fund management firm believes that the demand for Bitcoin would drastically increase by the end of the year as the US dollar continues to lose value significantly.
The Bull Run is also estimated due to the ongoing global pandemic that has created a need for a globally accepted alternative asset that is limited in supply. It points towards gold and Bitcoin. Grayscale Investments believes that rising inflation is also one of the major factors that would contribute towards increasing demand for Bitcoin in the near future. High inflation in the economy would force consumers to look for alternative assets and currencies for investment purposes as well as for transactions.
In the current state of the financial landscape globally, the scarcity of monetary assets in the market is a factor that investors are looking for. Grayscale Investments also noted that it would take some time for an average consumer to define and understand the value of Bitcoin tokens, though. It would be highly confusing for the consumers to assign a fair and just value to Bitcoin easily, even as the consumers agree that digital asset does make sense going ahead in the future. In a way, Bitcoin is similar to Gold, and many analysts and average consumers also look at it that way. It is because the standard discounted cash flow analysis is not possible with Bitcoin, primarily because it is not a cash-generating asset.
The market price and trend of any asset depend on the chain of supply and demand. Due to the blockchain technology on which Bitcoin is designed and developed, which has no cash flow system in it, there is no possibility of rating Bitcoin based on supply and demand. It is because only 21 million Bitcoin would ever exist, and hence, its supply is limited and finite, just like gold. So, the price would shift more on-demand. The demand for the Bitcoin would also depend heavily on factors such as the volume of Bitcoin being traded at any given point in the market. The lesser the number of Bitcoins being traded, the more would be the surge in the prices. It happens as many investors are in for the long haul, which means they would be holding on to their digital asset for a considerable period into the foreseeable future.
The price of Bitcoin is expected to rise also because many of the buyers for life (HODL) are creating an upward trend. CEO of Ark Invest, Cathy Wood, said that the resistance level between the maximum-ever price of Bitcoin and its current price is at its lowest. After the price of Bitcoin fell around 2017-2018, the industry went through a major restructuring and stabilization. Many corporations, governments, institutional investors, and average consumers have shown a massive interest in Bitcoin after the period. In the market language, it is called a “shakeout period,” when inexperienced and short-term buyers sell the assets. It also means that the industry is maturing.
Even though the growth during the maturity period is slow, it means that the investors are in for the long haul and better returns. Once the price falls during this period, the surge continues slowly but steadily as investors look to invest during this period. In 2019, even though the industry was still in the consolidation phase, it proved to be a productive year for cryptocurrencies and digital assets. In 2019, the prices at the end of the year were double that at the beginning of the year. There are numerous other factors that point towards Bitcoin gaining massively in the next few years, but one thing is for certain that the investors won’t be disappointed.