A 'Hypless' Bitcoin Rally that Could be More Sustainable than that of 2017

The price of Bitcoin reached its highest levels since December 2017 in midweek trade amidst an ongoing demand for the digital currency that analysts say is linked to a growing perception that it offers investors the same characteristics as gold, a development that hints that perhaps this time around the rally is more sustainable.

"So far this year, the cryptocurrency has been up 150% as it closes in on its all-time high – close to USD 20,000," says Jeroen Blokland, Portfolio Manager Multi Asset at Robeco. Yet, what seems to be different from 2017 is the lack of hype surrounding bitcoin’s recent rise. Perhaps this has something to do with the fact that bitcoin was up 18-fold in 2017."

The surge in the value of Bitcoin takes the leading cryptocurrency’s total market capitalisation to over $315 billion, just below its $335 billion record.

The price in Bitcoin in U.S. Dollars topped $18000 on Wednesday and is quoted at $18207 at the time of writing, the Sterling price is quoted at £13700.00 while in Euros the price is quoted at €15320.

Bitcoin rally in Pound Sterling prices

Blokland says currently, most investors are treating bitcoin as digital gold – as some kind of digital store of value - whereas back in 2017 it was pretty unclear what form bitcoin would take.

"Also, unlike 2017, there are substantial inflows from institutional parties. The Greyscale Bitcoin Trust attracted USD 0.7 billion in inflows in Q3 – most of which was from institutional investors," says Blokland.

There are still however caveats to be observed says the analysts as just as back in 2017, bitcoin remains an extremely volatile and a small asset class.

"With a market cap of USD 330 billion, bitcoin would represent just 0.25% of the 'Global Multi-Asset Market Portfolio', which is constructed by adding the total market capitalisation of all major asset classes. If we look at gold separately, this asset class has a market cap that is 30 times larger than that of bitcoin. This does not take away, however, from the fact that bitcoin has come a long way since its ‘creation’ back in 2009," says Blokland.

According to deVere Group - an independent financial advisory organisation - nearly three-quarters of high net worth individuals will be invested in cryptocurrencies before the end of 2022.

A survey carried out by deVere Group finds that 73% of poll participants are now already invested in or will make investments in digital currencies, such as Bitcoin, Ethereum and XRP, before the end of 2022.

The 700-plus respondents are clients who currently reside in North America, the UK, Asia, Africa, the Middle East, East Asia, Australasia and Latin America, ‘high net worth’ is classified in this context as having a more than £1m (or equivalent) in investable assets.

"As the survey shows, this impressive performance is drawing the attention of wealthy investors who increasingly understand that digital currencies are the future of money and they don’t want to be left in the past,” says Nigel Green, deVere Group CEO and founder.

Bitcoin in euros

The same poll undertaken last year found that 68% of high net worth individuals are now already invested in or will make investments in digital currencies before the end of 2022, meaning there has been a jump of 5% year-on-year.

"No doubt that many of these HNWs who were polled have seen that a major driver of the price surge is the growing interest being expressed by institutional investors who are capitalising on the high returns that the digital asset class is currently offering," says Green. "They – including some of the biggest Wall Street banks amongst others - are now aware that the world’s biggest and most influential decentralised currency isn’t going anywhere."

Green goes on to add:

"This will mean that they are set to bring even more of their knowledge and capital into the already booming sector – and this is unlikely to have been overlooked by wealthy retail investors.

"Nor too will the recent decision by one of the biggest payment companies in the world, PayPal, to allow customers to buy, sell and hold Bitcoin, have gone unnoticed.”

Like Blokland, Green says that investors are being attracted to bullish Bitcoin as it is a legitimate hedge against longer-term inflation concerns which have come to the fore due to stimulus packages"– more of which are promised by major governments and central banks around the world.