EDITOR NOTE: Over the last few months, there have been many institutional analysts who have been urging investors, however begrudgingly, to take Bitcoin seriously as a safe haven asset. Perhaps its second rise was something of a “proof in the pudding” moment, validating the cryptocurrency as a formidable competitor to gold and silver. Earlier this month, JP Morgan analysts projected that Bitcoin might even reach $146,000. Now they’re saying, due to changing circumstances affecting total capital inflows, that Bitcoin may never reach $40,000 again--that there isn’t enough capital flowing into it or any of its derivatives to sustain Bitcoin’s rise. That’s quite a turnaround, but it reflects the volatile nature of the cryptomarkets. If anything, it invalidates Bitcoin’s near-term capacity to serve as a reliable store of value (because it’s jumping all over the place, and unpredictably so). Without reliability as a store of value, how can Bitcoin possibly be considered a “safe haven” asset like gold and silver? So, what are these institutional analysts talking about? How can they even make recommendations on something that’s so fundamentally flawed? Are they trying to sell us a long-term projection seen through myopic (and hence incapable) eyes?
The vertiginous rise that the price of Bitcoin experienced in December and early January, made many investors pin their hopes on the cryptocurrency . However, analysts at the financial JP Morgan Chase doubt that the electronic currency can be traded above $ 40,000 again .
On January 7, Bitcoin broke the barrier of $ 40,000 , and in the following days it cost up to $ 42,000 . In this context, JP Morgan specialists projected that the cryptocurrency could reach $ 146,000 per unit and would compete with gold.
Of course, the world of cryptocurrencies is a roller coaster. Just a few days after the prediction, on January 11, Bitcoin (BTC) fell below $ 30,000 . Since then, the digital currency has kept oscillating between $ 31,000 and $ 35,000 , with peaks of up to $ 39,000 , but until there.
In the past 24 hours #Bitcoin has crashed more than $4,500 or about 15%.
— Bitcoin (@Bitcoin) January 22, 2021
Why has Bitcoin not recovered?
Faced with this scenario, the JP Morgan team of strategists greatly lowered their expectations for Bitcoin . According to new estimates, weak demand and the possibility of investors withdrawing their profits , prevents BTC from returning to the values of two weeks ago.
Analysts believe that the flow of institutional resources to Grayscale Bitcoin Trust , a financial product that allows investing in cryptocurrencies, "is not strong enough for Bitcoin to exceed $ 40,000 ," they say in a report cited by Bloomberg .
"The short-term risk balance is still down," they warned from JP Morgan .
According metrics Glassnode, cited by Criptonoticias , the BTC is experiencing greater liquidity depletion for years. This is partly because funds are being withdrawn from exchanges, but also because cryptocurrencies are continually moving towards the 'hodlers'. He adds that only in the last 30 days around 270 thousand Bitcoins have been transferred to entities considered as savers.
For its part, BlackRock , the investment company with the most assets under its management in the world, will include Bitcoin derivatives in its product offering. It filed updated prospectuses with the SEC to include cash settled BTC futures as an investment option in two of its funds.
At the beginning of 2020, Bitcoin had an average price of $ 7,300 and closed the year at more than $ 29,000. That means an approximate growth of 400% in 12 months. As of early December of that year alone, the cryptocurrency was worth about $ 19,000, representing a 53% increase in one month. Then, in the first days of 2021, it shot above 42,000 , then lost 20% of its value.
Originally posted on Entrepreneur