Is the rise in crypto prices sustainable?

With Bitcoin reaching new all-time highs multiple times this year, it’s not surprising that an increasing number of investors are eyeing Bitcoin for potential investment opportunities. 

 

Bitcoin is climbing to another record amid signs of a widening embrace across the financial services industry. The cryptocurrency is now on the verge of breaking $50,000 for the first time” reported Adam Haigh on Bloomberg Daybreak: Australia on February 15th. Many investors are now wondering if Bitcoin will keep rising above the $50,000 mark, and how sustainable this crypto-market rise will end up being. 

 

The first thing to note is that pullbacks and corrections will very likely happen at some point, without necessarily reversing the upward trend. While they may not appear so to investors, market corrections are actually healthy, beneficial, and necessary – especially taking into consideration the velocity of the recent rise of the cryptocurrency market. These corrections allow Bitcoin and altcoins to build a new, more stable base towards future records. 

 

These upward and downward movements can offer great investment windows, which traders can take advantage of by trading crypto on mobile apps over the short-term. Platforms that offer derivative products on cryptocurrencies can take advantage of the volatility in crypto-prices, without owning the underlying token.

 

Another reason many analysts believe the rise in Bitcoin might keep going is because of recent growing interest from institutional investors. More and more companies are now investing cash into Bitcoin. After MicroStrategy, Square, and PayPal in 2020, Tesla recently announced having invested $1.5 billion of its cash reserves into Bitcoin. Moreover, the company declared that it might soon accept Bitcoin as a form of payment.

 

Tesla said in the SEC filing that it bought Bitcoin tokens for “more flexibility to further diversify and maximize returns on our cash“. As Tesla might also accept BTC in exchange for its products, these new tokens will help Tesla build its liquidity, preparing for the moment when it will start accepting the BTC for payment “in the near future, subject to applicable laws and initially on a limited basis“.

 

With different well-known international companies now considering accepting Bitcoin (or are allocating part of their investment portfolio to Bitcoin), many institutional investors believe that the adoption of cryptocurrencies is growing, and they want to be part of this success. It is also worth mentioning that more and more institutional investors are looking into crypto-currencies as an alternative form of investment they could use to diversify their portfolio and get substantial returns. Some of them even consider Bitcoin as a new store of value, like Gold.

 

Very recently, JP Morgan and Morgan Stanley announced that they might soon invest in Bitcoin if the demand for it continues to rise, as significant Wall Street firms like MasterCard and BlackRock might be moving towards Bitcoin. JPMorgan’s Co-President, Daniel Pinto, told CNBC on February 12th: “If over time an asset class develops that is going to be used by different asset managers and investors, we will have to be involved. The demand isn’t there yet, but Im sure it will be at some point.

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