Tesla entered the game with a high profile, how high will Bitcoin rise in 2021?
Tesla stated that according to the new policy, a total of 1.5 billion U.S. dollars has been invested in Bitcoin and it is expected to start accepting Bitcoin as a form of payment product shortly. Will be bound by applicable law and will initially be based on a limited basis. Also, in the future, some cash may be invested in alternative reserve assets, including digital assets, gold and gold ETFs.
As soon as the news came out, Bitcoin rose strongly. According to the OKEx market, at around 21 o’clock on the 8th, BTC broke through 43,000 USDT and hit a new record high at 4,3162.2 USDT, a 24-hour increase of 13.82%.
The “call order” from Tesla will surely trigger a new round of FOMO. We believe that the rising trend of Bitcoin will continue for some time, but at the same time, the main driving factors of Bitcoin’s rise are undergoing some changes. In this bull market, the main driving forces that promote the long-term rise of BTC include the new crown epidemic, the central bank’s massive release of water (mainly in the United States), grayscale holdings, DeFi lock-ups, and the Bitcoin halving effect. In the following, we will specifically discuss these five factors, the changes that have occurred or are about to occur, and the possible impacts, based on which we will take a peak forecast for BTC in 2021.
Reminder: The part of the article involving price prediction is the analyst’s personal opinion, which is for reference only and does not constitute investment advice. Investors are expected to pay attention to market risks.
Besides, regarding the main driving factors of Bitcoin and the economic principles behind it, we have published a series of Bitcoin research articles in early November. Readers can click to view them. This article will not introduce too much: “A new high in the year, 12 years old How much can the future of Bitcoin rise? “, “The structural opportunity “grey cow” has arrived, is it too late to get on the bus now? “, “Although the cold winter is coming, the five benefits will bring the bull market spring breeze? “, “Revealing the Economic Principles Behind the Bitcoin Bull-Bear Conversion”.
The impact of the epidemic on Bitcoin is expected to change from strong to weak from April; June and July are expected to have an inflexion point in the U.S. epidemic, and the resumption of work and production will accelerate, and the impact of the epidemic on Bitcoin will plummet; wait until August and September, the comparison of the epidemic The impact of Bitcoin will basically fade.
After the WBS staged the air-squeeze war, Wall Street became more worried about currency bubbles. If the US epidemic is effectively controlled, the Fed’s monetary policy will undergo a huge adjustment, which will likely burst many financial asset bubbles, and Bitcoin will also be affected.
Compared with Bitcoin, the interest of institutions in investments such as Ethereum has increased significantly, and it has shown a tendency to diversify the allocation of encrypted assets. The early stage of the bull market is dominated by Bitcoin, and the next stage will be dominated by Ethereum and its ecology. Due to the performance limitations of Ethereum, Competitive public chains will enjoy the value of Ethereum’s spillover bonus.
During the rise of Bitcoin, the early stage was dominated by institutional investors such as Grayscale; after February, DeFi became the main influence on the rise of BTC. DeFi’s expansion of BTC application scenarios further promoted and supported the Bitcoin bull market. Smart institutions just entered the market first and followed the trend to assist.
As the proportion of Bitcoin blockchain rewards halving in supply has declined, the cumulative time required for the “halving effect” to erupt is also longer. By studying the change in the ratio of each halving, and extending the research results to subsequent halving events, the BTC peaking forecast can be formed. According to Pantera Capital’s calculations, Bitcoin will reach a peak price of $115,212 in August 2021.
We believe that Bitcoin will have a double top market this round, the first time being promoted by institutions and the second time by retail investors. The price of BTC is expected to reach USD 50,000-60,000 in April; it is expected to peak around USD 70,000 when the pandemic in June and July emerges at a major turning point; a major correction is expected afterwards, with a correction range of 30%-60%. Driven by the return of DeFi value and retail investors, Bitcoin is expected to peak again, perhaps in the fall.
Bitcoin has just entered the “post-epidemic era”
With the rise of Bitcoin, many new investors have entered the crypto market because of celebrity effects and news reports. These people may wonder: Does the epidemic really affect Bitcoin?
Here is a brief explanation with the data in the grayscale report. In October 2020, Grayscale released a report on “Grayscale Bitcoin Investment Report: The Great Wealth Transfer Promotes BTC to Become a Mainstream Investment Target”. It mentioned that the new crown virus outbreak in 2020 is the main driving force of Bitcoin investment. 38% of Bitcoin investors have invested in Bitcoin in the past four months, and two-thirds of them stated that they chose to invest in Bitcoin because of the new crown virus. It can be seen from this report that the impact of the epidemic on Bitcoin is relatively direct.
When will the epidemic end? In September 2020, Bill Gates said in an interview with The Economist: “The global pandemic will not end until at least the end of 2021. After 2021, some poor and backward countries or very few developed countries will still There are low-level dissemination cases.” From the perspective of the current epidemic prevention and control, the global epidemic is completely over, and it may indeed take a long time; but it should be noted that this article mainly discusses the impact of the epidemic on Bitcoin and the crypto market, so The so-called “post-epidemic era” of Bitcoin refers to the watershed of the epidemic in the United States. This is mainly because of the largest buyer in the current round of Bitcoin’s rise in the United States. And we believe that the landmark event of Bitcoin entering the post-epidemic era is Biden’s rise to power.
After Biden took office, he resolutely resisted the epidemic, proposed seven goals, and issued very strict policies, completely reversing Trump’s approach, and expanding production of vaccines, and the US epidemic is expected to be controlled. According to a report from China Youth Network, the Biden administration ordered American people to wear masks for 100 days, and required people to wear masks on planes, trains and other public transportation; besides, international travellers need to undergo COVID-19 testing before boarding the plane and arrive in the United States. Isolate afterwards. The Biden administration has increased the production and purchase of vaccines through measures such as the National Defense Production Law. This law allows the president to direct the production of important materials during wartime (or cf. wartime) and ensure that syringes and other medical supplies are available. Other anti-epidemic measures include: setting up a federal epidemic response team to coordinate the work of various agencies; increasing state emergency funding; setting up an equality task force to deal with differences in infection, morbidity and mortality among races, ethnic groups, and geography; and rejoining the World Health Organization.
In January 2021, Ma Jing, chairman and secretary-general of the China-US Health Summit and professor at Harvard Medical School, said in an interview with Phoenix.com: Vaccine promotion is phased. In 2021, there will be a large-scale promotion in the United States in June and July. It is hoped that the epidemic will be controlled by vaccines before the end of the year. “Biden proposes to vaccinate 110 million people in 100 days (with some difficulty), and perhaps it will be able to achieve initial results in April, and if the vaccine is widely promoted in June and July, it is expected to achieve basic control in August and September. And the resumption of work and production. As the financial market is expected to be positive in advance, the trend of Bitcoin may show up in price before the epidemic subsides. Therefore, in July and August, the impact of the epidemic on Bitcoin may be diminished.
The alarm bell of the Fed’s massive release of water has sounded,
Policy shift may have an impact on BTC
Under the influence of the new crown epidemic, global central banks have released a lot of water, and the Fed has released the “financial nuclear weapons” of “zero interest rate + unlimited QE”. The series of policies (see above) introduced by Biden after he came to power require very much money in practice: for example, increase vaccine production and purchase, increase state emergency funds, compensate states for the purchase of protective equipment, and provide national soldiers supporting the epidemic. Grant subsidies and so on. Therefore, as soon as Biden came to power, he proposed a massive $1.9 trillion COVID-19 assistance plan. The Senate reviewed the resolution on February 4 and finally passed it, and the House of Representatives will also vote. For the financial market, Biden’s 1.9 trillion new crown aid plan is like a huge bubble about to blow up. Under such a big bubble, Bitcoin and traditional financial assets are likely to have a more crazy performance.
When the financial bubble is getting bigger and bigger, the crisis has come. The air-squeeze war of the century that was staged by retail investors on the WBS Forum in the past few days has actually sounded the alarm for this round of bubbles. The evil effects of the central bank’s release of water are beginning to show, and Wall Street has begun to worry. According to the Financial Associated Press, Dallas Federal Reserve Chairman Robert Kaplan said on Tuesday (February 2) that the Fed’s large-scale bond purchase plan has boosted the recent trading frenzy in stocks such as GameStop. Too loose monetary policy may cause excess funds in the market, and it is hoped that the Fed’s influence on the market will be reduced as soon as possible. That is, once the pandemic has passed, the Fed should begin to withdraw its unconventional easing policy.
Jeffrey Young, the former global head of foreign exchange at Citigroup and the co-founder and CEO of Shenzhen Digital Macro, said recently: “If the United States does not have ultra-loose monetary and fiscal policies, it is difficult to imagine such an epic short-squeeze. The war’ will happen.”
Carson Block, the founder of Muddy Waters, a well-known short-selling institution, also accused the Fed of injecting too much capital into the market and allowing excessive use of credit and leverage. When the financial market bubble finally burst, the worst suffered Will be retail investors.
As the US epidemic is still severe, the Fed’s policy will continue. Fed Chairman Powell said recently that considering that millions of Americans are still unemployed, it is “too early” to consider reducing the Fed’s bond purchase program. If the prevention and control of the epidemic are effective in April, as analyzed above, and basic control is achieved in August and September, then the Fed’s policy will undoubtedly be adjusted accordingly, and some financial asset bubbles will begin to be pierced. Investors must remain in awe of the market and know how to take profit.
Grayscale shows signs of slowing down in Bitcoin holdings. On February 2, Skew data showed that after Grayscale launched GBTC in 2013, the GBTC premium turned negative for the first time. Historically, the GBTC premium has been quite high, and the premium last month was about 40%. However, on February 2, data showed that the index had fallen to -1.5% and then rebounded slightly.
In response to this phenomenon, there are three main explanations in the market: the first explanation believes that the decline in the premium may be due to increased sales by qualified investors (there is indeed a batch of GBTC unlocked around February 3); the second analysis believes that Qualified investors lack demand for GBTC at this price; the third analysis suggests that the lack of demand for GBTC may be due to intensified market competition, which promotes other demand (for example, GBTC can also be purchased on Paypal, which is more convenient for retail investors).
According to the previous rules, the unlocked GBTC will create selling pressure on the market, but this selling pressure will gradually weaken over time. Since a batch of GBTC was unlocked on February 3, the premium rate of GBTC has remained at a low level so far. It shows that the lower GBTC premium is not simply caused by unlocking selling, but to some extent, the market demand for GBTC is indeed insufficient.
At the same time, institutional investors’ interest in Ethereum continues to increase, and they have shown their desire to diversify the allocation of encrypted assets. According to the report released by Grayscale: Since June, the asset management scale of Grayscale BTC Trust has expanded from approximately US$3.403 billion on June 1 to approximately US$10.469 billion on December 4, an increase of approximately 207.66%. Grayscale ETH Trust’s asset management scale expanded from approximately US$331 million on June 1 to approximately US$1.677 billion on December 4, an increase of 406.16%, which is equivalent to a five-fold increase.
According to statistics, Grayscale Trust increased its holdings by 664.7 BTC and 105,000 ETH from February 1st to 7th. There is a big difference between the increase in holdings of BTC and Ethereum, and the shift of institutional investment tendency is very obvious. At the same time, Grayscale has also stepped up to register several encrypted asset trust products recently, which reflects the desire of institutional investors to diversify the allocation of encrypted assets, especially DeFi financial assets. This is not random speculation. The mainstream financial market in the United States is in fact constantly accepting Ethereum and DeFi. For example, the CFTC approved CME to launch Ethereum futures. The former chairman of the CFTC has also been very optimistic about DeFi’s financial innovation. DeFi affirms its innovation.
What is reflected behind the change in institutional investment trends? In essence, institutions regard Bitcoin as a target in their investment portfolio. In their view, Bitcoin is essentially a risk asset, or, as Dalio said, it is more like a bullish view of future digital assets. Options and encrypted assets such as Ethereum also have potential and value. In the process of increasing awareness, they have naturally become new optional targets in institutional investment portfolios. Among these institutional investors, Bridgewater Fund Dario’s attitude change and his views on Bitcoin are very representative.
In November 2020, Dalio hinted on Twitter that Bitcoin is not a good store of value due to its high volatility and the potential to be banned by the government. In December 2020, Dario once again tweeted that Bitcoin (and some other digital currencies) has established itself in the past decade as a meaningful asset substitute similar to gold. Bitcoin has similarities and differences with gold and other mobile wealth assets with limited supply (unlike real estate). At the end of January 2021, Dario once again issued an article to further introduce three views on Bitcoin:
1. The price of Bitcoin is still extremely unstable, which means that its future purchasing power is still full of speculation. Compared with existing hedging assets such as gold, real estate, or legal safe-haven currencies, Bitcoin will have greater fluctuations in its value in the future.
2. Bitcoin still has major regulatory risks because it does not have any potential government endorsements and has no long historical background, so it cannot provide a baseline for future demand.
3. Although Bitcoin’s liquidity has now accelerated, the current level will still bring structural challenges that hinder large traditional institutions such as Bridgewater and their customers from holding Bitcoin.
The three reasons Dalio explained are the fundamental reasons why institutional investors cannot afford to take a heavy hold on Bitcoin. In the context of large amounts of water released by central banks around the world, Bitcoin is a deflationary asset and a digital asset. The proper allocation of institutions is mainly to resist the risk of traditional asset bubbles. It is still necessary for institutions to fully believe that Bitcoin can be used as a “gold substitute” Time, after all, Bitcoin is still young compared to gold. What needs to be explained here is that from the news, more and more institutions are still entering the crypto market, but in reality, it is rare for a single institution to continue to buy bitcoins in large numbers and long-term, while speculative institutions are no longer A few, once the Bitcoin premium decreases and speculative demand weakens, it will go out of the “magic curse” similar to a vicious circle; until the GBTC premium rises sharply (for example, BTC plummets and institutional investors re-influx), thus forming a positive cycle. Push up prices.
As for why it is so optimistic about ETH, Galaxy Digital’s official view on Ethereum is very representative. It believes that 2021 will be the year of Ethereum. As a growth asset, investing in Ethereum is like investing in a package that is in the early stage of rapid growth. The same with technology stocks. As to why DeFi is optimistic, we quote a passage from Heath Tarbert, former chairman of the US Commodity Futures Trading Commission (CFTC), to illustrate. Tarbert said in an event on October 15, 2020: The whole idea of DeFi is first of all revolutionary. I think it may eventually lead to large-scale disintermediation of the financial system and traditional participants. It may even reduce systemic risk to some extent because our financial system is not concentrated in these large and systemically important institutions on a global scale.
Overall, in this round of bull market, the role of institutions is very obvious; institutions’ demand for Bitcoin has decreased to a certain extent, and they have become more and more interested in more valuable crypto assets such as Ethereum (especially in the DeFi field). Also, due to performance issues in Ethereum, other public value chains will enjoy the value of Ethereum’s spillover dividends. This makes the crypto market from the Bitcoin bull market into a full-blown bull market stage, and Ethereum will most likely be in this stage Better performance than BTC.
DeFi began to become the dominant force affecting BTC
Bitcoin is a great innovation in technology-driven finance. DeFi has built a decentralized financial infrastructure on Ethereum, which is also a huge financial and technological innovation. In the development of DeFi, Bitcoin has further established its position as a “digital gold” with the help of the DeFi wave. Competitors such as BCH and BSV have been completely left behind. At the same time, in the DeFi boom, WBTC and other anchor coins have emerged to solve the problem. In addition to many problems such as slow transfer of Bitcoin and lack of application scenarios, it further increases its “currency” attribute and can maintain an advantage in the future competition with legal currency. The following figure shows the growth of BTC use cases in DeFi:
It can be seen from the figure that the amount of BTC locked in DeFi is very consistent with the development period of DeFi. During the rapid development of DeFi, the amount of BTC locked up has also increased significantly. In the process of DeFi de-bubble in September, the locked BTC in DeFi also dropped to a certain extent; then DeFi continued to show very strong vitality, BTC lock-up volume also continued to record high.
Further observation of the BTC price performance shows that DeFi debubbled from September to October, and DeFi leading tokens generally plummeted; Bitcoin also experienced a deep correction after hitting $20,000. This trend is highly consistent…
From the perspective of holding positions, the amount of BTC locked in DeFi was 5255 BTC on June 1 (DeFi outbreak period). As of January 31, the amount of locked BTC in DeFi reached 161,668, and the amount of BTC locked in increased by 156,413. The increase was about 2976%. Grayscale BTC trust holdings were 356,716 as of June 1, and as of January 31, Grayscale BTC trust holdings were 648,468, a net increase of 291,752, and holdings increased by 81.78%. From June 2020 to January 2021, the increase in Grayscale BTC holdings was nearly twice the increase in BTC locked positions in DeFi. Grayscale was indeed the most important force affecting the rise of Bitcoin before February 2021; but Judging from the increase in the increase in BTC holdings, the increase in grey holdings has gradually slowed down, while the increase in BTC locked positions in DeFi has grown extremely rapidly.
From February 1 to 7, Grayscale Trust increased its holdings by 664.7 BTC, but the amount of BTC locked in DeFi increased by 7252. The increase in BTC lockup in DeFi has exceeded Grayscale’s influence on BTC and has gradually become The most dominant force driving the price of BTC.
Before January 2021, Grayscale will play a leading role in the price impact of Bitcoin. At this time, institutional investors pay more attention to Bitcoin. Starting in February, institutional investors began to focus more on crypto-assets such as Ethereum. Under “Six benefits, February will belong to Ethereum” (https://www.odaily.com/post/5163615), we also gave a more detailed introduction; since February, DeFi has gradually become The main dominant force supporting the price of BTC. In a sense, DeFi’s expansion of BTC application scenarios is the root cause that really pushes up the Bitcoin bull market. Smart institutions are the first to enter the market and follow the trend to form powerful assists.
The impact of the halving effect on Bitcoin
In the crypto industry, there has always been a “four-year halving market”, that is, a bull market appears after the Bitcoin mining reward “halving”. In theory, it means that the supply of the Bitcoin network is halved, and the demand remains unchanged or An increase will push up prices, but each halving is different and regular.
Bitcoin mining reward halving has the greatest impact the first time because the reward halving amount accounts for the largest proportion of the total supply, and the time for the halving effect to erupt is shorter; but as the blockchain reward halving accounts for the proportion of supply, The cumulative time required for the “halving effect” to erupt is also longer. Research and analyze the effect of Bitcoin block reward halving, by studying the change in the ratio of each halving, and extending the research results to subsequent halving events, to form a peak indicator.
From historical data, before the Bitcoin halving, the average time for the price to bottom was 459 days. From the halving to the real bull market, the average time is about 446 days. The figure below shows the supply before each Bitcoin block reward halving and the percentage change in supply after each Bitcoin block reward halving.
The first Bitcoin block reward was halved, which accounted for 15% of the total supply; the second Bitcoin block reward was halved, and the supply was only one-third of the first halving. This phenomenon is very interesting. , Because this halving will have exactly one-third of the price increase. If we extrapolate this trend to the Bitcoin block reward halving event in 2020, then: this time the reduction in Bitcoin supply is only 40% of 2016. If this relationship is established, it means that the price of Bitcoin will rise by 40% of the previous price. Based on this calculation, Pantera Capital calculated that Bitcoin will reach a peak price of $115,212 in August 2021.
The price of Bitcoin undoubtedly shows a certain cyclical pattern. According to the Bitcoin halving theory, Pantera Capital produced a forecast chart of Bitcoin price:
We believe that history is surprisingly similar, but we also believe that it will not simply repeat itself. Below we will combine the influencing factors and prediction models discussed in the previous section to make some predictions on the BTC price.
We believe that the US epidemic and Fed policy are very important external stimulus factors in this bull market, which have largely affected the price changes of Bitcoin. According to this, Bitcoin’s rise will be divided into the following stages: The first stage, from February to early March, is the period of strong Bitcoin’s rise. In this stage, the epidemic in the United States is still severe and the impact on Bitcoin is still great. The Biden administration is also actively advancing the economic stimulus bill. The Fed’s massive release of water will further boost Bitcoin significantly; Phase 2: Between April and May, due to the gradual control of the epidemic, the resumption of work and production continues, and Bitcoin rises Momentum is declining, but the Fed will continue to release water, and Bitcoin still has the basis for rising; the third stage: June to July, the US epidemic has a big turning point, market confidence is gradually restored, the US economy is showing signs of improvement, and the Fed’s policy is turning to the possibility Increased, Bitcoin rose crazily and peaked due to other factors; the fourth stage: From August to September, Bitcoin experienced a deep correction (Note: The peak time is likely to be in late July and early August). The reason for the big correction in August and September is that the biggest stimulus outside the crypto market has basically disappeared.
After the deep correction of the first peak, we believe that BTC is expected to rise again to form a double top. The first top is mainly driven by institutions and the second top is mainly driven by retail investors. The time may extend to autumn and winter. After the first deep Bitcoin correction, the main reason for supporting Bitcoin’s rebound was the DeFi value support discussed above. At present, DeFi has actually become the main driver of BTC, and behind DeFi is the entry of many retail investors. Also, we are seeing more and more rich and famous people calling for a single bitcoin. For example, the world’s richest man Musk enters the market, grayscale casts advertisements on a large scale, and many rich and famous people change their Twitter comments to Bitcoin. This celebrity effect will attract many retail investors to enter the market one after another.
At what price will Bitcoin peak?
Bridgewater Fund Dalio mentioned in “Rui Dalio: My View on Bitcoin”: We assume that half of the total market value of privately held gold savings is allocated to Bitcoin, which means that Approximately 1.6 trillion U.S. dollars will be allocated to all bitcoins that have been mined. From gold to Bitcoin, investors began to try to diversify their investments, which in theory can increase the price of Bitcoin by at least 160%. Dalio published this article on January 30, when the price of BTC was 37,000 US dollars. Based on this, it is estimated that the target price of BTC is 96,200 US dollars, which is around 100,000 US dollars.
Pantera Capital calculated based on the halving effect that Bitcoin will reach a peak price of $115,212 in August 2021.
On January 6, former Bitcoin China CEO Bobby Lee made a prediction similar to the “double top trend” considered in this article (different internal judgment logic). He said on Weibo: Considering Bitcoin With the rapid price increase, we may experience a double top bull market like in 2013. Bitcoin price made its first high in April 2013 and reached the peak of the bull market in December. At that time, the first high occurred when profitable funds were withdrawn, and the price corrected and then stabilized in the summer and autumn. Short-term corrections are often in the same year of the bull market, and the adjustment range is small, which may be 40%-60%. The real big drop after the end of the bull market is an 80% drop from a historical high, which will accompany the bear market in the next few years. If this bull market is really going to take the double top market, the position of the first high point will be 70,000-99,000 US dollars, and will not exceed 100,000 US dollars. ”
The prediction of the BTC price in this article mainly studies the main factors that affect the price, estimates its position in a round of megatrends, and infers its peak price. This article gives an in-depth introduction to the five main factors that affect the price of Bitcoin. After entering February, these five factors have begun to change or have begun to show signs of change. This article believes that February is likely to be in the middle of the general trend, and therefore believes Bitcoin’s peak price is around $70,000. The first retracement ranged between 30%-60%, and then the second peaking market started.