Why Bitcoin Is Set To Blast Back Toward Highs
(Tech stock columnist Jon D. Markman publishes Strategic Advantage, a lively guide to investing in the digital transformation of business and society. Click here for a trial.)
Institutions are rushing back into bitcoin. The new demand should push the crypto currency back to $65,000 in the days ahead.
Beginning on Monday the German government will allow institutional funds that currently control $2.1 trillion to begin investing in bitcoin. This shift represents more mainstreaming of crypto.
Prices are set to surge even more.
The bearish argument against crypto is digital coins do not represent a store of value and therefore there is no demand from so-called real investors. Institutional investors are as real as it gets. However, the rule change in Germany is likely the result of intense lobbying by professionals clamoring for the opportunity to add bitcoin to the most conservative funds.
Demand for bitcoin is significant.
The reason is simple: Global central banks are creating new currency at an unprecedented rate. The Federal Reserve is currently buying $120 billion worth of treasury and mortgage-backed securities every month. The dollars used to fund these purchases is being digitally created out of thin air. There is no sign this strategy to flood the system with liquidity will change anytime soon.
Bitcoin is capped at 22 million units. It is decentralized and cryptographically secure. Nobody has control. And its public digital ledger cannot be altered for any reason.
Scarcity and protection against fiat currency devaluation is the argument for bitcoin.
It is why professionals want in.
The German strategy shift will allow 20% investment by Speziafonds, fixed asset investments that are only accessible by pension companies and insurance funds, according to a report Saturday at Bloomberg.
Bitcoin traded up to $42,500 this weekend. In the past significant price surges have always followed periods in which prices rose for 9 consecutive session. There is resistance at $44,740 then free sailing all the way to the old high at $65,000.
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