Bitcoin’s epic run continues, hitting a new all time high

After surging 40% in November, Bitcoin posted a new all time high USD price of $19,764.5 on Brave New Coin’s Bitcoin Liquid Index (BLX). The BLX is the flagship index for the global Bitcoin markets. The BLX captures a comprehensive, global sample of liquidity on the highest volume and quality exchanges. The BLX has been calculated since 2010 with 0 downtime.

Source: BLX on TradingView

After a steep run up in price to above $19,000 in November, the Bitcoin price experienced a swift correction down to $17,000 last week, before recovering to today’s new all time high.

In the 2017 bull market, Bitcoin rallies lasted seven weeks on average before experiencing a correction of between 30% and 40%.

Bitcoin is in a firm bull trend for the moment, with analysts noting that institutional buying may lead to a firmer floor as any dips are bought aggressively.

There is yet to be the same retail mania of 2017, that led to a surge of signups to crypto exchanges and an explosion in Google search trends for Bitcoin. However, there are early signs that a surge is on the way. There is a significant uptick on Google trends for terms such as “Coinbase” and “Buy Bitcoin”. Binance CEO CZ says that the Binance Exchange is experiencing record trading volumes as traders look to generate altcoin profits on the back of the Bitcoin surge.

Simon Peters, crypto asset analyst at investment platform eToro is also seeing an increase in crypto trading. “Bitcoin’s exceptional run continues, with $20,000 now within touching distance,” said Peters. “On the eToro platform, the average number of Bitcoin trades per day in November was 81% higher than it has been throughout 2020. I wouldn’t be surprised if Bitcoin becomes a key topic at the Christmas dinner table.”

Bitcoin’s rally is strengthening as a series of bullish news events continue to stoke demand for the crypto asset. It has never been easier for retail investors to buy Bitcoin with Square’s Cash App experiencing exponential growth in 2020. As a result, competing money app PayPal launched its crypto buying platform in November. Now, U.S. PayPal users can buy and sell Bitcoin and several other crypto assets.

It’s not just retail traders driving the current boom in prices for Bitcoin. There’s growing interest from institutional investors as Wall Street analysts gradually acknowledge that Bitcoin may have a role to play in an investment portfolio.

While the 2017 Bitcoin boom was a speculative frenzy that led to an unsustainable boom and bust cycle, the latest run-up in price lacks the euphoria of 2017 suggesting a more sustainable price trend. While Bitcoin’s volatility is likely to continue, investors are increasingly buying Bitcoin for the long term, viewing it as digital gold, with less trading in and out of the asset for short term gains.

In fact, gold’s loss may be Bitcoin’s gain. With bitcoin continuing to outperform gold, some gold investors appear to be looking at Bitcoin with fresh eyes. The Gold Observer’s Jan Nieuwenhuijs noted large outflows from gold funds.

Source: Twitter

Meanwhile, financial commentator Raoul Pal, consistently a BTC and Gold bull throughout 2020, announced on Twitter yesterday that he was exiting his gold positions to allocate more to BTC and ETH.

Source: Twitter

Yesterday it was announced that the Guggenheim Macro Opportunities Fund may seek investment exposure to Bitcoin by investing up to 10% of its net asset value in Grayscale’s Bitcoin Trust. The Grayscale Bitcoin Trust has custody of more than 500,000 Bitcoins and is buying more every week. As outlined in a Grayscale report, the trust’s holdings are worth over $9 billion and represent 2.69% of Bitcoin’s (BTC) outstanding supply and market cap.

Finally, Niall Ferguson, the influential historian, published an op-ed in Bloomberg yesterday titled Bitcoin Is Winning the Covid-19 Monetary Revolution. Ferguson is the author of The Ascent of Money, which was published in 2008 and documents the history of money, credit, and banking.

In his opinion piece, Ferguson writes “We are living through a monetary revolution so multifaceted that few of us comprehend its full extent. The technological transformation of the internet is driving this revolution. The pandemic of 2020 has accelerated it.”

Ferguson then compares the price movements of US dollars, gold, and Bitcoin during the pandemic and the likely rise of central bank digital currencies in the decade ahead.

However, says Ferguson, “Rather than seeking to create a Chinese-style digital dollar, Joe Biden’s nascent administration should recognize the benefits of integrating Bitcoin into the U.S. financial system — which, after all, was originally designed to be less centralized and more respectful of individual privacy than the systems of less-free societies.”

For a figure such as Ferguson to suggest that the U.S. integrate Bitcoin into the financial system would have been unthinkable a few years ago, and it shows how quickly Bitcoin is gaining in legitimacy.

A growing supply crisis

Another factor that appears to be contributing to Bitcoin’s meteoric rise is an increased awareness that there may be a growing shortage of Bitcoin and a looming supply crisis. This narrative is based on the simple combination of less supply following the May halving, and the accelerated buying by big entities such as Square, PayPal, and Grayscale.

Following May’s third Bitcoin halving, the number of newly mined Bitcoins on a daily basis dropped from 1800 to 900. While it is difficult to get precise data, many reports suggest that Square (The Cash App) and PayPal (has just enabled crypto purchases for U.S. customers) are already buying more than the 900 newly mined Bitcoins a day.

Institutional crypto fund manager Grayscale is being even more aggressive. The Grayscale Bitcoin Trust now has custody of more than 500,000 Bitcoins and is buying more every day. As outlined in a Grayscale report, the trust’s holdings are worth over $9 billion and represent 2.69% of Bitcoin’s (BTC) outstanding supply and market cap.

If the combined buying of the above three entities can easily absorb the 900 newly mined bitcoins each day, then the implication is simple. New sellers will need to appear to meet the demand, if not, the price will go up. As Pantera Capital says in their November letter, “That’s where the finite-supply, inelasticity part comes in: At a higher price. That is THE story in Bitcoin right now. When other, larger financial institutions follow their lead, the supply scarcity will become even more imbalanced. The only way supply and demand equilibrates is at a higher price.”

Another data point that shows the increasing interest in Bitcoin is that our website traffic at Brave New Coin has doubled in the last seven days. The majority of those new visits are reading articles related to how to buy or how to mine Bitcoin and other crypto assets. This is the same trend we saw in late 2017 – about two months before BTC hit its current all time high.