Bitcoin prices hit all-time highs above $ 41.000 - here it is quotation in real time - less than a month after breaking the $ 20.000 mark for the first time. At this moment it is natural to ask: why prices rise and bitcoin will collapse? The reality is that the history of cryptocurrency is so short that no one knows for sure what should happen now or in the future. This hasn't stopped digital asset investors or even Wall Street analysts from publishing price predictions. Here are some key reasons why bitcoin prices have risen recently:
- Demand from institutional buyers, many of whom view bitcoin as a hedge against inflation. The cryptocurrency is seen as a hedge against inflation because, according to the original programming of the blockchain, only 21 million bitcoins can be created and this creates a contrast with central banks such as the Federal Reserve which can decide based on the vote of one. commission of printing more money.
- The decline of the US dollar in the foreign exchange markets. The US dollar index, an indicator of the dollar's value against major world currencies such as the euro and the Japanese yen, slipped 6,8% in 2020 and is down again in 2021. This creates a boost for bitcoin. since the price of the cryptocurrency is mainly denominated in US dollars.
- Retail purchases. Many people are speculating on bitcoin prices and it has become easier and easier to buy bitcoins, with large services like PayPal (PYPL) allowing purchases since last year.
But could bitcoin prices collapse? Sure they could. Below is a sample of comments from cryptocurrency analysts and other financial experts on what a pullback might look like and what could cause it.
- Bitcoin "has been and remains extremely volatile", said Joe DiPasquale, CEO, BitBull Capital, a hedge fund focused on cryptocurrencies. He speculates on a possible correction, although there appear to be many interested buyers at a price around $ 28.000, so that level could work as a price support.
- There hasn't been a single year since 2013 in which prices have not fallen by at least 25% from the high point reached earlier that year, said Gavin Smith, CEO of digital asset firm Panxora. He said he wouldn't be surprised to see bitcoin prices rise to $ 70.000 or $ 80.000, nor a 40% setback. In the medium term, he is optimistic: "For a period of three years, this is a great asset." But in the long run, there is a risk that technological developments could overtake bitcoin.
- "The history of financial markets is the history of bubbles"said James Angel, a Georgetown University finance professor. A potential trigger for a quick sell-off could be any action taken by authorities against tether (USDT), a stablecoin that has become a key source of liquidity in digital asset markets. New York State prosecutors are currently fighting Tether in court.
