Another top 10 asset
For the first time since 2021, Bitcoin is back in the top 10 largest assets with a market capitalization of almost USD 1.5 trillion. Bitcoin has thus recently overtaken the precious metal silver, is currently in eighth place and remains a good three times stronger than the second-highest cryptocurrency: Ethereum with a capitalization of less than USD 500 billion. Among the top 10, gold is in first place alongside six of the "Magnificent Seven" (Microsoft, Apple, Nvidia, Alphabet, Amazon and Meta Platforms - Tesla is in 18th place). This means that there are exactly two assets among the equity giants that could compete with each other on the basis of their function. There is no question that gold is far ahead as a store-of-value asset and can look back on a millennia-long history that inspires enormous confidence. However, Bitcoin has had an impressive - albeit very short - career: initially labelled as "dirty internet money", it now enjoys broad institutional attention, is recognized as a commodity by the SEC and repeatedly causes unique price jumps.
What is currently driving the price
Without question, Bitcoin has received strong support in recent weeks and months from the successful ETF applications in the USA. However, not only do BlackRock and Fidelity as Bitcoin ETF issuers now need to replenish their holdings, but major Bitcoin investors such as Tesla and Micro Strategy are also continuing to expand their holdings. However, holdings on the major crypto exchanges are currently not only falling due to sales to large institutions, but more and more coins are being withdrawn into small wallets despite prices close to the all-time high. Some positions for sale may already be set between USD 70-80,000, as some speculators will take their profits in this range. A price correction is then likely. However, it is rather unlikely that this would lead to a major sell-off due to the extremely positive signs of the aforementioned factors. The last sentence must be understood in the context of the volatile Bitcoin price (!), a price loss of +-30% is possible at any time, even within a few days. From a technical chart perspective, a realistic next low should be a maximum of USD 40,000. History also shows that the price of Bitcoin will never again fall far below the penultimate all-time high. However, this would still require a clear break through the USD 70,000 mark with sustained growth. For long-term Bitcoin observers, however, the current price trend is not in line with their forecasts. So far, a bullish outlook has only been valid for 2024/25 due to the halving event in April 2024. Approximately every four years, the distributed reward for finding a new block via the mining algorithm, which is paid out to miners roughly every ten minutes, halves. Months after the last four halvings, Bitcoin always rose to a new all-time high. This would have been in the time frame between November 2024 and January 2025, but the price event has now occurred before that. Contrary to this forecast, there is no economic explanation for the correlation between halving and price targets. The miners do not have enough purchasing power to drive the price significantly and are constantly selling bitcoins on the exchanges anyway. The reverse is true: they are dependent on a higher price in order to remain profitable at all, as many miners would otherwise have to cease their activities if they were paid less and electricity prices and hardware costs remained the same. Nevertheless, it cannot be ruled out that the four-year cycle will continue and that we will even see highs in the six-digit range towards the end of the year.
What makes Bitcoin so successful
Bitcoin offers something that the other cryptocurrencies cannot. It's not about the technical details, the pioneering position, the catchy name or the initial adoption. Although the latter plays an important role (more on this in a moment), the core of the Bitcoin network lies in its trustlessness. Unlike Ethereum and many other networks, Bitcoin is a decentralized infrastructure and not a company. This also distinguishes it significantly from all other top 10 assets with the exception of gold, which it resembles in that it was not invented by a company or distributed centrally. Of course, there are also comparable networks in the crypto world such as Litecoin and Monero, which, like Bitcoin, manage without a central entity. However, these networks were not a great success as they could not improve on the central promise of Bitcoin and only appeared when Bitcoin was already being used as money and was widely used (2010-2011). The Bitcoin network is unsurpassed in its decentralization and may be impossible to catch up with. There is no other computer network with such a high degree of distribution at all conceivable levels. Bitcoin's software runs on millions of nodes on every continent and is even distributed from space by Blockstream satellites. Large companies and private individuals play a major role in mining and thus in the security of the network. No major institution holds a significant share of the network or Bitcoin stock. With the exception of the first Bitcoin addresses, which hold a large proportion of all coins, Bitcoin holdings are widely distributed compared to other cryptocurrencies. Whether these first addresses are still accessible, however, remains to be seen; after all, the address attributed to the inventor Satoshi Nakamoto has never been touched. That all sounds too good, so what are the risks? The biggest risk is undoubtedly the far too short history of Bitcoin. All of the above points could theoretically be relativized over time. In view of the decreasing tendency to use Bitcoin as a means of payment, the question arises as to what the central function of the network will be in the future. Today, Bitcoin (like gold) is less a direct means of payment than a store of value. Technologies such as Lightning or Liquid would offer sufficient incentive: Point-of-sales, for example, can be set up much faster than credit card terminals. However, nobody wants to spend their coins at the moment, as the price keeps soaring to new heights. As a disclaimer, it must always be remembered that volatility makes entry extremely difficult and there is no absolute certainty of repeated prices in the current price segment. This is also true for any other asset, but under significantly different circumstances and with a longer history of experience.
What beginners should consider
If you want to get into Bitcoin now, you should be aware that unfortunately you can't do anything right or wrong. An adequate cost-average strategy could help you escape the casino mentality and get through any upcoming bearish phases. At the moment (March 2024), the signs are still good for further breakthroughs of the 80,000 and even 100,000 dollar targets. However, corrections are always more severe than in the stock market and completely different to gold. Reaching these levels is likely to lead to sell-offs, which would then lead to a "small" downward spiral. The next low could then be around the current price of 70,000 dollars. On the other hand, if the pattern of halving cycles repeats itself, an investment now is particularly worthwhile, as we will not see such low prices again any time soon.