Bitcoin Hits a New Market Cap Record, but This Time Everything Is Different for Two Reasons
The increase is guided by a long-term vision.
Things are going very fast for Bitcoin at the moment. Bitcoin has indeed entered a bullish rally for the last few weeks that nothing seems to be able to stop. I write about Bitcoin every day, and every day the Bitcoin price is crossing a new barrier at the moment.
Yesterday, I was writing about Bitcoin that was crossing the $17K barrier.
Today, I’m already writing that Bitcoin has crossed the $18K barrier without difficulty. Bitcoin has reached an annual high of $18,393. At the time of writing, the Bitcoin price is holding up well above $18K since its price is $18.1K.
So don’t be surprised if the $20K is crossed by the end of the week. It seems to be only a matter of time.
Bitcoin hits a new market cap record
During this bullish rally, Bitcoin has already broken a record that dates back to the end of 2017. This is its market cap. Bitcoin has surpassed the record of $334 billion that was set on December 17, 2017:
The previous market cap record was set when Bitcoin tested $20K at the end of 2017. This time, Bitcoin beats that record when its price is only $18K.
Some people wonder how this is possible. The answer is quite simple.
New Bitcoins are issued every day. Every time a block of transactions is validated, new Bitcoins are issued. This is the reward for miners who correctly validate a block. As you know, since the third Bitcoin Halving that took place on May 11, 2020, this reward is 6.25 BTC.
This means that an average of 900 BTC are issued every day on the Bitcoin network.
Under these conditions, the number of Bitcoins already in circulation is higher today than it was in December 2017. With a price of $18K, Bitcoin is, therefore, able to post a market cap of $336 billion.
As for the maximum supply of Bitcoin, don’t worry, it will stay well at 21 million units no matter what happens. The rate of issuance of new Bitcoins will also continue to slow down Halving after Halving.
The extreme greed of the market suggests a correction is imminent
With a Bitcoin breaking its record market cap at the end of 2017, market sentiment is naturally extremely greedy. It is often this kind of situation that leads to a significant correction in the Bitcoin price. We may therefore be in the middle of a “Sell High” phase.
Is Bitcoin entering a "Sell High" phase?
In the investment world, there are some golden rules. Among the best known, you have probably already heard these: I…
A lot of people are wondering if we are going to experience the same fall as after the Bull Run of 2017. It’s a legitimate question. My feeling is that the current situation is totally different for two major reasons.
The market is much more mature.
At the time, many people were taken by surprise when they saw the Bitcoin price soar so high at the end of 2017. Within a few weeks, the Bitcoin price had gone from $6K to $20K. What all Bitcoiners had been forecasting seemed to materialize.
The 2017 Bull Run was driven by greed and speculation
Euphoria had seized the market with a FOMO feeling that had reached the general public. Everyone wanted to buy Bitcoin. Greed and speculation were the two keys behind this FOMO sentiment at the end of 2017.
The general public was afraid to miss the opportunity to make money with Bitcoin. Research volumes had exploded at that time, demonstrating the enormous interest of the general public in Bitcoin.
However, there was no long-term vision here. Coinbase was receiving more than 100,000 applications for its platform every day, but the majority of the new entrants had not understood the why of Bitcoin. All that interested the new entrants at the time was the lure of gain.
Nowadays, the Bitcoin rally we are experiencing is not driven by this greedy euphoria of the general public.
Google search volumes for the terms “Bitcoin” and “Buy Bitcoin” are still ten times lower than they were at the end of 2017 :
The current Bitcoin Rally is guided by a long term vision
The current rally is due to smart money. Institutional investors, whales, billionaires, big companies, and maybe even banks are on the move.
All these players are investing in Bitcoin with a long-term vision. They are well aware that Bitcoin is the ultimate weapon against the great monetary inflation that we are currently experiencing.
They are buying Bitcoin as a reserve asset.
Thus, when the Bitcoin price undergoes the beginning of a correction, these investors will not panic. They will not start selling all their newly-acquired Bitcoin at a loss. This is one of the big differences from what we experienced in 2018 after the Bull Run at the end of 2017.
All the new entrants had panicked at the time because of a lack of confidence in Bitcoin.
They had sold their Bitcoins at a loss because they had no long-term vision. This will not happen this time. Quite the contrary. When the Bitcoin price corrects, there will always be HODLers of last resort to accumulate more and more BTC.
Everything is different this time, and that is why the year 2021 looks so promising for Bitcoin. The Bitcoin price will reach $20K in a kind of general indifference of the general public. The objectives of Bitcoin are now much higher.
The general euphoria will take hold of the general public much later in 2021 when the Bitcoin price will approach $50K. The goal of seeing Bitcoin reach $100K by the end of 2021 is even more relevant today.
In the meantime, we will probably have seen many other major announcements that will support this increase in the Bitcoin price. I am thinking, for example, of a player like Amazon, which could support Bitcoin as a means of payment, or Apple, which will end up using at least 1% of its $192 billion cash reserve to buy Bitcoin.
At the level of financial billionaires, we will also have important turnarounds in 2021 with Ray Dalio who is already beginning to doubt his anti-Bitcoin position.
We often hear the expression “this time it’s different” in the financial world, but I think that in the case of Bitcoin, there is nothing more true than that at the moment.
See you tomorrow for a Bitcoin above $19K…