For the second week in a row, bitcoin reached new all-time highs, peaking at $28,387.00 on Sunday, December 27th. As the price continued to rise, Bitcoin’s market capitalization surged past $500 billion. The recent price action is continuing to drive institutions to adapt quickly. Investment firms and corporations alike are continuing to buy bitcoin as an inflation hedge with asymmetric risk to the upside. This is in stark contrast to Ripple, a controversial digital asset that is under increasing pressure from regulators.
- Bitcoin price continues to surge as we head into year end. Between December 24th and 27th, Bitcoin reached new all-time highs on a daily basis. At the time of writing, Bitcoin’s price has been hovering at about $27,000. At a price of $27,000, Bitcoin has garnered a 53% return for the month-to-date, as well as a 276% return year-to-date. For investors who bought at the peak of the market price in late 2017 and held, the value of their investment has grown by 37.4% and has averaged at a 12.46% annual return from 2018-2020. Comparatively, the S&P 500 has an average annual return of 12.42% over the same time period.
- The flood of institutional investors has continued as the Bitcoin price surges. BlackRock, an investment management company that currently has exposure to Bitcoin through its 15% stake in MicroStrategy, continues to hint at becoming more involved in Bitcoin and blockchain. Blackrock CEO Larry Fink is a vocal longtime supporter of Bitcoin, and the company recently announced it is looking for a VP of Blockchain to aid in their valuation of crypto assets. In addition, Skybridge Capital, the hedge fund owned by Anthony Scaramucci, filed documents with the SEC to create their first Bitcoin-focused fund. The proposed fund will have an initial $25 million investment. On the regulatory side, Bloomberg news reported that Gary Gensler may be the next SEC head. Gensler is the former CFTC Chairman and an MIT professor. He serves as senior advisor to MIT Media Digital Lab Currency Initiative and lectures on blockchain technology and digital currencies. His potential appointment is a positive sign for cryptocurrency regulation and growing institutional support.
- While Bitcoin continues surging, XRP, the cryptocurrency created by Ripple labs, is under pressure from regulators amidst a lawsuit filed by the SEC against Ripple and two of its executives for allegedly selling billions in unregistered securities. This has caused many exchanges to quickly delist the asset and XRP’s price to plummet almost 50% in the past week. The lawsuit highlights the centralized nature of the controversial cryptocurrency. XRP was created and managed by Ripple. The XRP ledger, which acts as a blockchain-like network to confirm and initiate transactions, is also managed by Ripple and their team for validators. This is in sharp contrast to Bitcoin, which is completely decentralized. This lawsuit should have minimal impact on Bitcoin, as the SEC has clearly stated in the past, Bitcoin is not considered a security.
Bitcoin markets have closed out the year with strong growth and positive returns for all investors who stayed invested. The macroeconomic events of 2020 have also bolstered demand for bitcoin, especially among institutions, as yields fall and investors scramble to gain exposure. With inflation and federal debt now expected to continue growing in 2021, investors are interested in how the bitcoin market will respond. Further regulatory support and clarification has also increased consumer confidence in the long-term value of bitcoin.