Bitcoin price update: The $1,000 drop

Posted: 21 December 2020 10:13 am
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Many remain bullish despite Bitcoin dropping US$1,000 in less than 90 minutes.

Bitcoin has broken through US$24,000. The price of Bitcoin on Gemini Exchange read US$24,270 before taking a dip of almost US$1,000. Bitcoin is at US$23,420 at the time of writing having reached as low as US$23,285, the only sign over the last 4 days that Bitcoin's price can indeed contract.

Over the last month Ethereum, Ripple's XRP and Litecoin have all priced in major gains adding over 30%. Ethereum, which has the second largest market capitalisation after Bitcoin, is up over 32% on the month to date.

Ethereum has increased both its popularity and market cap over the summer as market sentiment turned bullish for decentralised finance (DeFi) which uses crypto technology to recreate traditional financial instruments such as loans and insurance.

Learn how to buy Bitcoin

Litecoin, otherwise termed the silver to Bitcoin's gold, has this week climbed to its highest price in more than 16 months. It is currently trading around 40% higher month on month. Interestingly Litecoin is still trading beneath its 2017 high by around 75%.

Mining equipment sees huge spike in prices

Following the recent interest around Bitcoin, Bitmain and MicroBT, the largest producers of Bitcoin mining equipment, have reported being sold out until May 2021 forcing miners to the second-hand market for replacement parts and newer machines. Since November, prices of the newest model rigs have increased by up to 35%.

Institutional uptake of Bitcoin looked on favourably by the market

Mainstream fintech giant PayPal's recent inclusion of Bitcoin transactions from within the app has been met with a positive response from the market, as its share price increased by over 17% since the announcement of the plans.

MicroStrategy is also in the limelight due to its bullish approach to digital assets. Its stock price has risen by 160% since deciding to move hundreds of millions of dollars in its corporate treasury to Bitcoin in July this year.

The Twitter Bot tracking MicroStrategy's Bitcoin investment shed some light as to why the company's share price surged:
"MICROSTRATEGY'S $425,000,000 (38,250BTC) BITCOINFUND IS NOW WORTH $901,422,450 +112.10% | CURRENT BTC PRICE: $23,567 SHARE PRICE WAS $118.22, NOW $309.05 WHICH IS +161.42% SINCE BITCOIN CAPITAL ALLOCATION STRATEGY ANNOUNCEMENT ON 08-JUL-20," it noted.

Rumours are also swirling that suggest Elon Musk is contemplating moving payment methods for Tesla and his other projects to Bitcoin.

Massive Bitcoin-related IPO

Coinbase is currently in the process of applying with the Securities and Exchange Commission in the US for authorisation to make an Initial Public Offering (IPO). Coinbase was valued at US$8 billion dollars in 2017 when papers were initially filed for an initial funds raising. Founder and CEO Brian Armstrong has sounded a warning to investors in a recent blog post cautioning readers about "short-term speculation" Armstrong also emphasised investors should be aware that "investing in crypto is not without risk".

Mike Novogratz, founder and CEO of Galaxy Digital has been a long time bull on Bitcoin and offers another explanation for the most recent rise of Bitcoin. He said that the Federal Reserve inflating its books by over 1.5 trillion dollars means that "there could not be a better macro story... for owning Bitcoin right now".

This theory was backed up over the weekend with Philip Gradwell, chief economist at Chainalysis, claiming that since the bond purchasing scheme was enacted, Bitcoin's price more than doubled from around $10,000 in September 2020.

This institutional uptake of Bitcoin as an investment vehicle at this time runs counter to the bull run around Bitcoin's 2017 all-time high which was made up of largely retail investors taking advantage of relaxed regulations on global markets and major financial institutions rejecting Bitcoin entirely.

"The role of institutional investors is becoming ever clearer in the data," Gradwell explained to investors. "Demand is being driven by North American investors on fiat exchanges, with greater demand from institutional buyers."

Adding to the chorus of positive sentiment around Bitcoin, Joshua Green managing partner of Orthogonal Trading said: "We expect significant further strength in Bitcoin in 2021, along with its ever present volatility, driven by a combination of increasing institutional and mainstream adoption as well as a supportive global macro backdrop."

Bitcoin was trading at US$23,591 as at the time of writing.

Interested in cryptocurrency? Learn more about Bitcoin with our beginner's guide to Bitcoin, see how to keep your crypto safe with our review of cryptocurrency wallets and dive deeper with our Cryptocurrency learning hub.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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