By Alex Mashinsky CEO of Celsius Network
Whether they are made through financial analysis or bubble-gum, Bubbles all have to increase continuously in size by some overwhelming behavior; new capital from retail investors, institutions, or air. The main difference between these types of bubbles is that an oversized financial bubble is far scarier a thing to pop than one made from gum or soap.
For those who have not been watching Bitcoin closely, a bursting bubble in 2017 shook the market and caused most retail BTC investors to retreat. However, now Bitcoin is rising because there are more buyers than sellers coming into the market. Part of it has to do with the Halving of new Bitcoin being issued, which is an event that occurred in May, which reduced the total supply of new bitcoin by 50% and pegged BTC inflation at 3%, but more importantly, it has to do with 2020. This year has seen some of the biggest names in finance yet to come into the industry, and historical levels of confusion about the future of the dollar from the Federal Reserve, causing investors to seek new non-correlated assets to hold.
This year alone, the Fed has pumped $9 trillion in new dollars into the U.S. economy or over 20% of all the dollars ever created, this liquidity inflated the stock markets to new highs (the real bubble). See the collapse in the velocity of the U.S. dollar.
The coronavirus pandemic has created the most conducive environment for acceleration of the global digital economy so no wonder Bitcoin and other digital currencies got to show-off the best aspects of their use cases. When the government prints more fiat, the value deflates; however, as Bitcoin's new supply decreases and more users want it, the value continues to climb. One bitcoin will always equal one bitcoin but when the number of users grows from 100m to 500m the value of each Bitcoin in dollars grows more than 5X due to the network effect of any monetary system.
See the increase in the velocity of stable coins:
The growth and awareness are compounded based on the last bull run. The people who got into crypto in 2017 are more likely to double down in 2020, and the people on the sidelines who "missed" the 2017 bull run are more likely to get in this time. In 2017, we had an unexpected rush of buy-in from retail investors due to the hype and FOMO ("fear of missing out"). Currently, the numbers indicate that FOMO level is not present, and the buy-in is much more spread out now between professional investors looking at institutional products like Grayscale, retail users through PayPal and Cash App, and the existing crypto community. Celsius Network which represents mostly retail investors has doubled its AUM to over $2.2B in less than 6 months
Since 2017, my company, Celsius Network has been promoting the need to “cross the chasm” to mass adoption and stating that Stablecoins are our best chance to get there. While others were betting on Security Tokens, Libra, NFT’s we focused on Yield as the second killer app for Crypto.
We are now seeing passing of the baton from the speculators who dominated the 2017 boom to mass adoption brought in by institutions, family offices and retail . Infrastructure is finally here, at scale, to welcome consumers and businesses. It has never been easier to buy, sell, and invest in crypto. Many of the new waves of crypto executives that have risen post-2017 believe in educating users rather than intimidating them. This mentality has led to a greater focus on usability and onboarding new users when we see these big surges in new retail investors.
The real question now is not why growth is happening now, but will this last. Since February of this year, I have been predicting new all-time highs for 2020, and now that we hit new highs in November 30 and even though there are no guarantees, I am confident that by the end of 2021, we will see bitcoin break $30,000. Even if prices may drop as much as 50% in the next 12 months because too many people try to sell their coins at the same time, I don't believe reactionary selling from political, pandemic, or economic issues will stop this climb and we will see BTC above $200,000 by 2025.
Bitcoin's price rally was inevitable, and five years from now, Bitcoin will be worth up to 10x more than it is worth today. 2020 gave us a glimpse of everything that proves Bitcoin's store of value, from the FED printing money to the economy shutting down, all combined with the scarcity effect baked into bitcoin. If you believe this is just another crypto bubble, fine. However, it is not going to pop, but instead, float triumphantly to the moon as all other dollar denominated assets continue to lose value.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.