The first and largest cryptocurrency by market capitalization, Bitcoin (BTC) reached a historical milestone today, December 16th, 2020 as it officially traded above $20,000. In a bulls’ stint, Bitcoin traded at highs of $21,163, a record never yet seen before in its short spanned history.
This historic milestone came after several attempts and failures to break above $20,000. Since Bitcoin has no apparent resistance above this level, it has now entered price discovery mode, and what’s next is anyone’s guess.
Analysts believe the current rally is different from 2017, which allows Bitcoin to grow even further. In explaining why the current rally is different, analysts cite reasons such as the growing institutional demand, increasing investor sentiment that BTC is a store of value, and stronger network fundamentals.
Bitcoin’s rally is already creating a ripple effect in the crypto market as the majority of Altcoins tagged along. The majority of the Altcoins are in green, Ethereum trades at $620 up by 5.6% daily. Litecoin and Bitcoin Cash are trading up at $89 and $300 respectively.
BTC/USD Daily ChartBitcoin presently trades at $21,150 after reaching highs of $21,163 on Coinbase. Analysts postulate three things to happen both on Bitcoin price and the general cryptocurrency market as a result of this monumental feat.
1) Bitcoin Breaking Past $20,000 Will Boost DeFi: Following the recent Bitcoin rally, demand for DeFi is believed to naturally rise as borrowing and trading volumes increase. Many DeFi users often put up tokens such as Wrapped Bitcoin (wBTC) and ETH as collateral to gain additional access to cryptocurrencies. Decentralized Apps and DEXs in the DeFi space will have more room for growth following the Bitcoin (BTC) rally in the short term.
2) Bitcoin Breaking Past $20,000 May Spur a Broader Rally: There are mixed opinions about what comes next after BTC surpasses $20,000 as it subsequently enters price discovery. It may be quite unlikely to predict BTC’s next ceiling until it peaks at a certain level as there is no longer any historical context when it surpasses $20k. Some believe there could be a blow-off top in the $20,000 to $21,000 range as euphoria peaks while others believe in the continuation of the rally till 2021.
Eric Thies, a cryptocurrency trader earlier stated that Bitcoin would likely see a newfound rally in January 2021 that would continue the ongoing uptrend:
“I’d expect with recent news of bank interest and continued retail growth, Bitcoin will soon be in the $20,000 zones and beyond. It’s no doubt we see a continuation of this uptrend and the birth of a new bull run. In January 2021 we will see new highs for Bitcoin”
Another trader believes that a break above $20,000 will create a cascade of sell liquidations, leading to a sharp rise in BTC.
3) Bitcoin Breaking Past $20,000 May Kickstart a New Phase of Retail Interest in Bitcoin: An analyst with the moniker “Crypto Monk” stated that a break of $20,000 presents the “max pain scenario” in his words “All those people who could have jumped in below $10k but decided to pass by targeting crazy low prices are now hoping for a massive pullback to get a second chance.”
Analysts cite two reasons why mainstream interest in Bitcoin will rise after BTC hits a new all-time high. First, many retail investors lost huge sums of capital in 2017, buying around $20,000. Thus, the all-time high remains an obstacle for many investors. Second, there is no historical ceiling for BTC above $20,000, so the price discovery period is likely to start.
On-chain data shows that the number of BTC holders, in general, is increasing. IntoTheBlock researchers recently pointed out that the number of Bitcoin addresses with balance reached 33.22 million, a record high. This suggests that retail interest in BTC is growing.
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