3 Reasons Why The Bitcoin Bull Run Of 2021 Is Different From 2017

Anupam Chugh

Besides the weakened U.S dollar there’s a lot more going in Bitcoin’s favor

Photo by Jessica Lewis on Unsplash

Bitcoin ended its bear run from a 12 month low in March 2020 to an all-time high above $23,000 by mid-December.

By the end of 2020, there was a lot of conjecture surrounding the wild rally of Bitcoin. Most people called this just another crypto bubble like the one in 2017.

Though in their defense, there are some similarities between Bitcoin’s bull run of 2020 and the two-month epic rally during 2017 — both of them happened at the end of the year and gained steam due to the halving event.

Regardless, now that we’re in 2021 and Bitcoin has already surpassed $34K, with a 20% YTD within the first three days of the year(that’s more than what most investment vehicles give per year), it’s pretty obvious that the current bull run is a lot different than 2017 and we can’t draw parallels.

Unless some catastrophe strikes, we may not see a drastic drop that pulls Bitcoin down to the 2018 lows. And there are more than just a few reasons why the world is more optimistic about the current Bitcoin bull run going into 2022.

Institutional Investors and Hedge Fund Managers Are Now Backing Bitcoin

Back in 2017, institutional investors were largely averse to Bitcoin. You’d probably know that JP Morgan’s then CEO, proclaimed “Bitcoin is a fraud” sending down shockwaves across new and seasoned investors all over the world.

To add more fuel to the misery, other iconic investors, including Warren Buffet, discouraged Bitcoin by calling it a mirage.

Though the Oracle of Omaha still doesn’t consider Bitcoin as an investment since there’s no underlying asset, yet in 2020 a lot of institutional investors have backed the most popular cryptocurrency coin.

From Grayscale to JPMorgan and ARK Invest, every major institution has been ramping up their investments in Bitcoin since the second quarter of 2020. At the same time, famous hedge fund managers such as Ray Dalio of Bridgewater Associates put Bitcoin in a credible asset class like Gold and see it as a good tool for portfolio diversification.

Ironically, Elon Musk has been more vocal about Bitcoin than ever. Lately, he’s been tweeting crypto memes and is embracing the idea of a crypto coin being used on Mars in the future.

Retail Investors Feel A Lot More Certain With Holding Bitcoin Today

It’s a no brainer that the 2017 cryptocurrency crash was primarily caused by the influx of retailer investors. New crypto enthusiasts especially millennials FOMO’d into the media hype and got drawn into the ICO bubble — initial offering of new digital tokens.

This led to crazy rallies of alternate currencies with the likes of Ripple, the third-largest currency back then having the sharpest spike only to crash subsequently(today, XRP is being sued by the SEC).

Having burnt their hands in the previous run-up, retail investors are a lot smarter today. They no longer view cryptocurrencies as a get quick-rich scheme and this was evident from the 2020 bull run which was entirely focused on Bitcoin(investors no longer hunt for the next multi-bagger coin). Clearly, they know, Bitcoin is and will continue to be the leader for years to come.

Another crucial reason behind the cryptocurrency slump in 2017 was the uncertainties with regards to government regulation. Asian markets were said to have caused a frenzy that drove Bitcoin to its peak. But then China began cracking down on their local crypto-businesses and India threatened to ban cryptocurrency trading causing uncertainties. Worse, Google and Facebook had started banning cryptocurrency ads on their respective platforms too.

This followed by a few security breaches across popular exchanges instilled fear among retail investors and they quickly pulled out their money causing a mass sell-off. The smaller market capitalization of Bitcoin certainly didn’t help and only caused more downward pressure.

But today, Bitcoin boasts of a market cap that’s more than what most tech companies(excluding Apple) possess. Also, blockchain technology has matured in the past few years and we now have plenty of sophisticated and secure wallets to easily hold, buy, or sell Bitcoins from.

As the icing on the cake, PayPal and Square, the two leading payment giants have officially supported Bitcoin on their platforms which definitely makes the retail investor feel more optimistic going into the next year.

The U.S. Dollar Fall Is The Driving Force Behind The Meteoric Rise Of Bitcoin

Unless you’re living under a rock, you’d probably know that the central banks have been releasing stimulus packages to help those suffering from the pandemic. After printing trillions of dollars back in April 2020, the Fed has begun rolling out the second stimulus package to boost economic recovery via quantitive easing.

In layman's terms, quantitive easing is a policy adopted by central banks to buys long-term securities to pump more money into the economy thereby increasing money circulation and encouraging people to borrow more.

Effectively, QE is done to prevent deflation and stimulate GDP growth through the supply of a currency. But if the economy recovers slowly this monetary policy can cause bigger repercussions — hyperinflation in the doomsday scenario.

Essentially, for every new dollar printed, the value of the current dollar in the market weakens and people end up losing their purchasing power which in turn causes a rise in inflation. No surprise, the U.S. dollar is collapsing at an unprecedented rate as people look to increase its value through the stock market and other vehicles.

When there’s so much uncertainty about the future of the U.S dollar, people typically flock towards safe-haven assets to protect themselves against inflation. Gold had been the de-facto store of value for decades. But with changing times, the world is slowly understanding the advantage of Bitcoin begins right at its inherent nature — which is de-regulatory.

Also, unlike Gold which could possibly be mined from Mars in the future, Bitcoin has a limited supply only. With only 21 million Bitcoins available and the last one to be mined by 2140, people have realized that it's a deflationary asset at its core. The price of Bitcoin won’t increase irrationally once its supply ends.

As this article succinctly points out, the central banks and government can steal your fiat currency by printing more. Therefore, investing in Bitcoin might just be the best way to counter the weakening dollar — which has led to the current buying spree.

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions. This story was originally published on The Big Bull.

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