Stocks are falling this morning as the vaccine rally loses steam. Moderna’s (NASDAQ: MRNA) Covid-19 vaccine, which for all intents and purposes seems superior to Pfizer’s (NYSE: PFE), pushed stocks higher yesterday.
Now, equities are coming back down to earth while new coronavirus cases surge in the United States, boosting the 7-day average for new infections to 150,000. Hospitalizations and deaths are up, too, albeit not as sharply.
And though an effective Covid vaccine is undoubtedly going to steal the headlines, another major development has been simmering beneath the surface:
Bitcoin’s return to glory.
After falling to $3,850 in March, Bitcoin has gone on an absolute tear. Five days ago, it surpassed $16,000 per coin. Today, one Bitcoin is trading for more than $17,000.
Had you bought at the bottom, you’d be up over 385% as of this morning.
Not bad for an asset that, at one point, financial institutions considered a total joke.
Ask Wall Street about Bitcoin these days, however, and you’ll see they’ve changed their tune.
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Thomas Fitzpatrick, a senior analyst at Citibank, said that Bitcoin’s recent swings in price are “exactly the kind of thing that sustains a long-term trend.”
He then went on to use technical analysis and a Bitcoin weekly candlestick chart to make a massive prediction on Twitter.
By December 2021, Fitzpatrick believes Bitcoin will hit $318,000.
It’s an eye-popping number to be sure of it. But is it realistic?
Over the last year, Fitzpatrick has become known for his “moonshot” price targets. Critics of the analysis say there’s no point trying to call Bitcoin prices due to its somewhat unpredictable nature.
Instead, they claim that simply identifying the trend – up or down – is wiser.
And they’re right. Going into a Bitcoin position with the assumption that it’ll hit $318,000 is a recipe for failure, if not frustration.
But that doesn’t invalidate Fitzpatrick’s analysis completely. Nor does it mean that he’s completely off base. Consider that in 2016, when Bitcoin was trading in the $500-$1,000 range, a $20,000 Bitcoin was downright inconceivable.
One year later, it topped out at almost $20,000 right around the 2017 holiday season. Only one notable analyst, Fundstrat founder and managing partner Tom Lee, saw it coming.
He’s been wrong about several other predictions since then – sometimes missing the mark by miles, even – but he proved that, with crypto, nearly anything is possible.
Investors need to adopt that same attitude with Bitcoin moving forward. Speculators were hit with a major wave of FOMO in late 2017, sparking an unexpected crypto boom.
In 2020, the institutions are starting to feel it as well. PayPal’s (NASDAQ: PYPL) got skin in the crypto game, now. So too does Square (NYSE: SQ), which revealed in October that the company had invested $50 million in Bitcoin.
Two weeks ago, Square also reported $1.63 billion in Bitcoin revenue and $32 million in gross profit via its Cash App. Grayscale Bitcoin Trust (NYSE: GBTC), which acts as an exchange-traded fund (ETF) for Bitcoin, holds more than 500,000 Bitcoin (worth over $8.5 billion) all on its own.
In other words, the amount of free-floating Bitcoin is dropping by the day. And it’ll likely get scarcer from here.
That’s not to say that Bitcoin will rise indefinitely, though. Eventually, it’ll have to endure a sell-off at some point. All assets do during a sustained rally.
But that’s not necessarily a bad thing.
Because when the next correction arrives, investors will be given an opportunity to buy. And if they don’t pull the trigger, they’ll likely be left sitting on the sidelines as Bitcoin’s value climbs to dizzying new heights.
Just like it did in 2017.