2021 would be a landmark day for Bitcoin and, by implication, the blockchain industry as a whole. Although Bitcoin has come a long way in terms of acceptance, the 2020-21 bull market has seen two important events hit Bitcoin’s investor base.
The first was an increase in financial investments, with demand coming from both conventional and institutional sources. Following suit, the price of Bitcoin was swift to respond. Another fascinating trend this year was the traditional sector and BTC’s partnership with the S&P 500, with gold seeming to have experienced its own evolution over the last few months.
As the first quarter of 2021 draws to a close, Bitcoin’s price and success as a store of value commodity remain incredibly optimistic, fueling a surge of institutional and retail buyers. This is considering Bitcoin’s recent high price, with the cryptocurrency hovering above $60k at the time of publishing.
Indeed, according to market statistics, this is the highest Q1 in the last 8 years in terms of price valuation, allowing the coin to record 100 percent returns, according to data presented by Arcane Research. During the same time period, two events boosted the price of BTC: the first was Tesla’s investment in BTC, and the second was BNY Mellon’s announcement of integrated services for BTC and other crypto-assets.
Surprisingly, Bitcoin’s Futures Open Interest levels have also reached all-time highs during the same period. This is right. According to CoinMetrics numbers, has been a double-edged sword that has allowed long-term growth for the asset. According to the study,
“With new money pouring into the market BTC futures open interest levels hit all-time highs preceding both major selloffs. Although painful in the short-term, these sell-offs helped close out some over-leveraged positions, clearing the path for further growth.”
Furthermore, the blockchain has managed to sustain a strong price pattern over the last three months. Indeed, Bitcoin’s conventional finance business rivals seemed to have altered their partnership with the king coin.
Although the year 2020 was out of the ordinary due to extraordinary macroeconomic circumstances, Bitcoin maintained a strong link with asset groups such as the S&P 500. However, the pattern reversed itself in 2021, and BTC now enjoys a lot of freedom due to the low correlation with the S&P – bringing correlation levels back to what is considered natural.
This shift in the relationship was also visible when looking at the BTC-Gold connection. BTC’s nearest rivals as a store of wealth and long-term asset remain monetary metals like gold, and CoinMetrics’ data seemed to show that the shift in BTC’s association with gold has seen ‘an even steeper fall, although it rebounded a little in March.’
This has resulted in BTC eroding gold’s market share, with the “Bitcoin is digital gold” argument gaining popularity.
Bitcoin’s correlation to conventional assets will decline even more in the coming months and the remaining three-quarters of 2021. This is expected to raise institutional investor confidence, due to the freedom the Bitcoin market has experienced in relation to other investments. Furthermore, the predicted values of market prediction models can soon materialise as the coin gathers enough momentum to smash past its established ATH of around $61.7k.
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