Unlike the 2017 bull run, you probably won’t see $10,000 BTC this time

Editor's note: This article is from Medium, written by Lucien Lecarme, translated by Qin Xiaofeng of Odaily Planet Daily and edited by Lu Xiaoming. Please be sure to indicate the source when reprinting.

Recently, the price of Bitcoin (BTC) broke through the psychological barrier of $10,000 and reached $11,000 on June 22. Currently, the price of BTC has always remained above $10,000. I believe that the price trend of BTC reflects an important trend: BTC is being accepted by the global market.

What is driving the current rise in BTC prices? 99% of the cryptocurrency trading community believes that the 2018 bear market is over.

I personally think that this BTC price increase is different from the bull market at the end of 2017. Through my observation, I also came to a conclusion: now is a good time to buy BTC, and we will no longer see BTC at 6,000, 8,000 or even less than 10,000 US dollars.

Below, I will give four reasons to support this conclusion.

1. Retail funds vs. institutional funds: the value storage debate

Looking back to 2017, when BTC broke through the $10,000 mark in November of that year, media hype began to emerge.

Mainstream newspapers have published articles about the rise of Bitcoin and what blockchain is, and social media is flooded with Bitcoin information, followed by various investment advice about cryptocurrencies.

By the time mainstream society learned how to buy Bitcoin, the price of Bitcoin had reached $14,000; a few days later, exchanges began to accept KYC (know your customer) certification from these people, and BTC reached $18,000. At that time, the trading volume of exchanges increased dramatically, so that trading platforms such as Binance, Coinbase, and Kraken needed several days to completely "digest" the orders of these novices.

Unfortunately, BTC started to decline after reaching nearly $20,000, and it was basically in a downward trend throughout 2018. Some investors who entered the market later became "buyers", and many suffered heavy losses.

Previously, mainstream society believed that cryptocurrency was a huge opportunity, but the advent of the bear market broke the trust of mainstream society. Many people felt that Bitcoin was too volatile to be a stable means of storing value after losing money on their investments.

What is the truth? Is Bitcoin really not suitable as a store of value?

In fact, it was unwise to buy Bitcoin only during the last crazy phase of the bull market in 2017 (end of the year). In the 10-year history of Bitcoin, this unwise buying period accounted for less than 0.3% of the total buying opportunities for Bitcoin.

As shown in the above figure, the red box represents the wrong time to buy BTC and the late bull market in 2017, and the blue background represents that Bitcoin has a history of more than 10 years.

In other words, at all other times in Bitcoin’s existence, buying Bitcoin was actually a good idea when you factored in possible future returns.

Take the above picture for example. Buying BTC at around $19,000 is not a wise move in the short term. We think it is unwise now only because BTC fell after reaching $20,000. But if BTC reaches $20,000 or even higher, wouldn’t it be a wise move?

Bitcoin is and will continue to be a means of storing value, and this view is now widely accepted by financial institutions. If the bull market in 2017 was driven by speculation and retail funds, the current price increase is more due to the influx of institutional funds, and they are long-term.

2. Geopolitical environment

The international political climate is increasingly unstable and tensions are escalating: the US-China trade war, the Iranian drone incident, the Brazilian populist elections, and the 2019 elections in Argentina, a country with hyperinflation.

In addition, the domestic situation in Venezuela is turbulent and relations between the United States and Venezuela remain tense; in France and other European countries, large-scale marches and protests against economic inequality continue to increase.

What consequences will geopolitical turmoil have?

The $50 rise in gold prices a few days ago is a clear sign of this. It also suggests that financial institutions and individuals are looking for safe havens to park their funds as confidence in the dollar declines.

People are choosing not only gold, but also Bitcoin, which is slowly coming into the public eye. Despite its high volatility, it is still seen as a safe and reliable means of storing value.

People are realizing and accepting it: Bitcoin’s underlying network can’t be shut down; the community is open source; and the price will continue to rise.

Although it is unlikely that Bitcoin will become a world-class digital currency payment method, it may become a world-class way of storing value and may replace gold in the future technology field.

The current market value of gold is 7 trillion US dollars, while the market value of Bitcoin is only 200 billion US dollars.

Although there is still a long way to go, the large amount of institutional funds entering the Bitcoin and Ethereum ecosystems shows that mainstream society recognizes cryptocurrencies and has given them the green light, which also proves that cryptocurrencies have great appreciation potential.

3. Facebook enters the crypto space

Mark Zuckerberg's entry into the crypto world is a positive signal for Bitcoin and the entire cryptocurrency space.

The use of the terms “cryptocurrency” and “blockchain” in Facebook’s recent white paper, coupled with a flood of press coverage, has further fueled mainstream interest and may lead to trust and eventual acceptance of cryptocurrencies.

Imagine that when Facebook's project makes cryptocurrency really work, it will help break the barriers of centralization and achieve true decentralization. By then, Libra may become an important tool for mainstream society to use cryptocurrency.

(Odaily Planet Daily Note: On June 18, Facebook's crypto project Libra went online and released a white paper. According to the white paper, Libra's main focus is cross-border payments. Click to jump to related reading)

A survey conducted by Kaspersky Labs in February 2019 showed that about 13% of people use cryptocurrency as a payment method.

The study collected responses from more than 12,000 consumers in 22 different countries. However, the report does not show how many people are using cryptocurrencies in countries with hyperinflation that actually need crypto payments (a question that will be analyzed later).

Coinmap data shows that the number of businesses accepting Bitcoin has increased 702% worldwide since December 2013.

(Libra will increase public confidence in cryptocurrency)

When millions of users start using Facebook and Whatsapp as a means of payment and a store of value, the use of other means of payment outside of these apps will quickly decrease in frequency. Once people figure out how fast, secure, and easy it is to transfer money using a mobile app, millions of people will use Facebook instead of PayPal to transfer money and eventually enter the era of digital banking, all thanks to Facebook.

4. The number of people who really need Bitcoin increases

Another force driving the growth of cryptocurrency prices and their application comes from people living in countries with hyperinflation or whose assets have been frozen by the government. The number of these people is growing, regardless of bull or bear markets.

In fact, some Argentines buy Bitcoin at the time when it is not suitable for purchase (0.3%) mentioned above. However, compared with the national currency, the depreciation of Argentines' investment in Bitcoin is lower and the value preservation effect is better.

Twitter user Josu San Martin said: "If an Argentine bought Bitcoin at the peak of the "biggest bubble in history" in 2017, his situation would definitely be better than keeping the money in an Argentine bank account. So tell me again, what a terrible means of storing value Bitcoin is."

Data from coin.dance shows that weekly Bitcoin trading volume in Argentina continues to rise, reaching new all-time highs. This trend is not surprising in countries like Venezuela, which are in the same hyperinflationary situation.

At the same time, more and more online and offline retailers are offering crypto payments in these countries. In fact, the BTC acceptance heat map in northern South America is very different from what it was six years ago.

(6 years ago)

(6 years later)

At present, a large amount of legal currency still enters the cryptocurrency market through financial institutions in some countries, but on May 11, a sum of $14 million in legal currency entered the market from Argentina. Although this figure is insignificant compared to the funds of large institutions, these figures will increase in the future.

Why? Because of growing geopolitical uncertainty, Venezuelans, Sudanese, Zimbabweans, and even Turks will be saving their life’s hard-earned money in something that can’t be seized or censored by their governments.

Now Facebook will be an option for these people. But if one day, this group of people finally finds that Facebook is not a good choice either - because Zuckerberg can also confiscate or freeze their money - at this time, only truly decentralized cryptocurrency can become their financial safe haven.

People in countries with hyperinflation need cryptocurrencies more to store value. Logically, as the number of these people increases, mainstream society will gradually adopt cryptocurrencies.

Bitcoin recently broke through $10,000, but due to the above reasons and momentum, this bull run is more sustainable than 2017.

I hope you understand that buying Bitcoin has always been a good idea. Despite the advent of the crypto age, deep down I still want cryptocurrencies to remain youthful, rebellious, and unpredictable.