The subsequently denied rumor that Amazon will soon accept Bitcoin has brought the crypto market back to life after a week-long summer break. As irrelevant as the news may be in the aftermath, it shows that the market is thirsty for news that drives prices. What are the reasons for the Bitcoin price to crack its all-time high of May 2021 this year?
After the Corona lockdown months, most people have better things to do than put their money in assets like Bitcoin. Instead, going to restaurants, vacations and shopping trips are on the to-do list – instead of investments, consumption comes first again. Of course, this is by no means the only reason for the weeks of privation on the crypto market, but at least one single influencing factor among many. There are good reasons for the fact that it could soon look completely different again, ergo Bitcoin switches back to rally mode:
1. News without effects
After the numerous bad news in May, June and July, the crypto market is reacting less and less to current events. The fact that China is cracking down on crypto mining and regulating all states will not be a walk in the park for the crypto sector should now have been fully priced in. Even the few positive news, such as the recognition of BTC as the national currency in El Salvador, could hardly trigger any reactions on the market. The Amazon rumor was the first positive news in weeks that managed to drive prices north – at least for a short time.
In the last few weeks, the market has mainly been on vacation and has developed the stability that is necessary for the next rally. This consolidation phase should then have come to an end by autumn at the latest. Because everyone should be aware of one thing: The bad news can even be viewed positively in the long term. The Chinese mining centralization is declining, institutional investors are more likely to invest in cryptocurrencies due to higher regulatory standards and the climate debate about Bitcoin makes mining “green” faster than without external pressure. What caused the prices to collapse in May will ensure the sustainable establishment of Bitcoin in the future.
2. Wall Street is not on vacation
As much as the crypto market is still in the hands of private individuals, investment banks, hedge funds, etc. are working to ensure that this will change soon. Even after the price slump in May, the institutional players are sticking to their crypto expansion plans. In July alone, it became known that JP Morgan, Goldman Sachs and Bank of America are significantly expanding their crypto services for their customers. For example, JP Morgan consultants can offer their customers Bitcoin and Ethereum index products.
At the same time, it became known that some asset managers had used the dip to buy more. Among other things, the well-known ETF publisher ARK Invest should be mentioned here. There is also a massive upgrade in terms of personnel. A subsidiary of the investment giant Fidelity wants to hire up to 100 new employees for its digital assets department. Although these developments do not make themselves felt overnight, they do lay the foundation for attracting new funds for the crypto sector.
3. Bitcoin appreciation pressure is increasing: Stock-to-flow at the end?
The stock-to-flow model (S2F) has been very good at predicting the price development in Bitcoin history. In crypto circles, many cling to the model’s bullish predictive power. Now, however, the S2F model seems to be on the verge of extinction. After all, Bitcoin should be around $ 90,000 – and not less than half, as is currently the case. Should the model from the creator “Plan B” prove to be right, a rapid rally would have to start in autumn at the latest. Otherwise one would have to regard the original S2F model as having failed.
4. With billions for mass adoption
Some crypto enthusiasts may not understand, but the crypto market, especially when it comes to further applications such as staking or lending, is a book with seven seals for most people. If more money is to flow into the crypto market, then the offers have to become even simpler and more suitable for the masses.
But this is also where things look very promising. There has been impressive funding over the past few weeks. The stablecoin company Circle raised $ 440 million at the end of May, and Fireblocks raised $ 310 million this week. In addition, Twitter founder Jack Dorsey’s company Square announced in July that it would build wallet and DeFi applications that should encourage mass adoption. In no other year has there been more financing of this magnitude for crypto companies – and we are still in the middle of 2021. The many billions of US dollars that are currently being invested in crypto development will be reflected in the next few months a better product range and higher attractiveness of the crypto sector.
5. Inflation and Bitcoin
Even if the current rise in inflation is more damaging than good to the crypto sector, as risk assets are punished in anticipation of rising interest rates, one must not ignore the social mood. While wealth inflation has not affected many people in recent years, this is now changing with the sharp rise in consumer prices, which can now also be felt at the shop counter. More than ever, people are becoming aware of how their monetary values are melting away year after year. Accordingly, the Bitcoin narrative of inflation protection will be further strengthened. More and more investors, especially conservative ones who have not yet dared themselves, will inevitably develop an ever greater openness to crypto currencies in the coming weeks and months.