Bitcoin’s progress in 2021 seems far from over. With the price of the cryptocurrency nearly doubling in the past 30 days, the coin has successfully entered its most prominent bull run, surpassing even the much-hyped surge of 2017. On March 13, Bitcoin reached a new all-time high of $61,895, marking the fourth breakout of 2021.
Data from a Glassnode report highlights reliance on Bitcoin is developing, with long-term holders (LTH) of Bitcoin not selling their positions for profits. This indicates that cryptocurrency is steadily establishing itself as a viable stronghold for many investors despite price volatility. As stated in the report, price volatility is a circumstance of short-term holders (STH) with wallet activity in the past six months who speculate on price activity to gain profits.
Bitcoin Is Becoming The Norm
As more stories and data emerge about how investors perceive Bitcoin, we can see that the cryptocurrency has overcome institutional scrutiny in some parts of the financial sector and is now looked at from a different perspective. In 2017, Bitcoin received criticisms about its high volatility and increased risk for investors. However, in 2021, institutions have shifted their focus toward Bitcoin and framed it as a currency with high investment potential. Its volatility has decreased in the past year due to an influx of sturdy investors that recognize Bitcoin for its long-term investment value.
The price of Bitcoin has surged in the past three months, but retail investors have had little to do with its steep incline. Retail or short-term holders affect the price of Bitcoin by adding volume; however, with more businesses accepting Bitcoin as a form of payment, the coin’s intrinsic value increases. More significantly, several institutions and multinational companies such as Tesla (NASDAQ:TSLA), Microstrategy (NASDAQ:MSTR), and even PayPal have staked their claim toward the juggernaut currency and publicly asserted the coin’s utility by investing millions of dollars.
Visa’s CEO claimed, “Bitcoin could become mainstream,” reinforcing the currency’s status as a fundamental store of value for future investors. And his case is relevant, as Bitcoin purchases have skyrocketed in the past three months. According to a Glassnode report, 95% of all Bitcoin purchases have been made in the last three months. While short-term holders judge Bitcoin by its capacity to generate quick profits, long-term traders are still in the process of accumulating more BTC and are reluctant to sell their existing holdings.
Institutional investors, such as Tesla and other multinational companies, do not show signs of selling during the dip. As a report by Glassnode indicates, Bitcoin has convinced investors of its possible long-term profits; they are not selling despite the coin’s dip in price. Thus, investor behavior is shifting in favor of Bitcoin. Large Bitcoin wallets are not selling when presented with the opportunity, and price volatility is a byproduct of short-term holders speculating on profit margins.
Although price volatility hasn’t perished from Bitcoin’s staple, the current liquidity is rapidly decreasing. Even miners have been reluctant to sell their coins for rapid profit, meaning Bitcoin has the potential to generate higher returns on investment in the long run.
On the Flipside
- Bitcoin is still highly volatile and can be a liability for new investors that enter the market late.
- Despite becoming mainstream and businesses accepting Bitcoin, cryptocurrency users won’t spend the currency because it can generate higher long-term profits.
- Institutional investors can cash out on their BTC if its price goes below their stop-loss limit.
Can Long-Term Investors Make Bitcoin Mainstream?
NYDIG CEO, Robby Gutmann believes we are witnessing a possible game-changing period, stating we’re “going to see an absolute drumbeat of pretty game-changing milestones.” His comments indicate that financial institutions have a high level of interest in investing in Bitcoin. Research done by Arcane Research suggests long-term holders are still in the process of accumulation with no incentive to sell their holdings. New investors claiming their position in the Bitcoin market can decrease the cryptocurrency’s volatility.
Bitcoin reiterates time and time again that it’s here to stay for the long haul. With companies being reluctant to hold cash in favor of Bitcoin, it shows the cryptocurrency is a viable solution for a store of value. Morgan Stanley (NYSE:MS) has become the first major US bank to acknowledge Bitcoin’s value and offer their clients access to private Bitcoin funds. This paves the way toward a firm currency, strengthening investors’ belief that Bitcoin is an investable asset class despite its volatility.
Despite the drop in price after the bull runs of 2017 and 2018, Bitcoin showed promise as more investors looked for a form of regulation to be more confident in their investment. The digital gold of the new millennium was created through widespread adoption following its inception. It only requires a few sturdy hands to dictate the currency’s pace and help facilitate a new influx of stable investors to consolidate its price for the future.