The path of least resistance for bitcoin is on the higher side, and the cryptocurrency could more than double from its current value in 2021, according to Bloomberg analysts.
“Bitcoin will maintain its propensity to advance in price into 2021, in our view, with macroeconomic, technical and demand [versus] supply indicators supportive of $50,000 target resistance, implying about a $1 trillion market cap,” noted Bloomberg Crypto in a monthly report.
The demand-supply mechanics are currently skewed bullish, as only 900 new coins mined each day compared with 1,800 in 2017, and institutional participation is increasing.
Notably, assets under management at Grayscale Bitcoin Trust recently breached the $10 billion level, having begun the year at $2 billion. The trust has bought nearly 70% of new bitcoins mined since May 11, when the cryptocurrency underwent its third reward halving. Grayscale is owned by Digital Currency Group, which is also the parent company of CoinDesk.
Open interest in the bitcoin futures listed on the Chicago Mercantile Exchange has risen above $1 billion for the first time on record compared with closer to $120 million in 2019, as per data source Skew.
Bloomberg analysts said they expect these trends to continue in 2021 because major central banks and governments are unlikely to scale back or halt their inflation-boosting stimulus programs anytime soon. The unconventional policies adopted by authorities to counter the coronavirus-induced slowdown have boosted demand for bitcoin and gold this year.
Past data also favors a rally to $50,000, according to Bloomberg. “The 2017 advance followed a 2016 supply reduction to 1,800 coins a day, and similar occurred in 2012-13,” Bloomberg analysts noted.
History looks to be repeating itself. Bitcoin’s recent move to a new record high of $19,920 has happened roughly seven months following the May 11 reward halving. Similar price action had unfolded following the July 2016 supply reduction.
While the odds appear stacked in favor of the bulls, the cryptocurrency remains vulnerable to a March-like panic sell-off in the global equity markets, according to Bloomberg analysts. However, they do not see prices falling below $10,000.
“The $10,000 mark has shifted to a critical support level after serving as the crypto’s resistance mark since 2017,” the report says.
Bitcoin fell sharply to $3,867 in March as global stock markets collapsed on fears of coronavirus-led recession, boosting demand for cash. Prices quickly recovered to $10,000 ahead of the May 11 reward halving.
The top cryptocurrency by market value reached a record high of $19,920 earlier this week, surpassing the previous all-time high of $19,783 reached in December 2017. Prices have more than doubled in the past three months alone.
