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Disclaimer: Investing into Cryptocurrency Involves Risk
At the time this article is published, I hold less than $1,000.00 investment in Bitcoin cryptocurrency and I do not encourage anyone to buy into any investment before consulting with your personal financial expert (i.e. Accountant, Financial advisor, Investment Broker). There is extreme risk involved with investing in a volatile cryptocurrency, which includes bitcoin.
Bitcoin Reaches over $41,000 Record High in January 2021
In January 2021, bitcoin reached a record all-time high of $41,000.00 USD, with a market value of over $700 billion. This pushed the cryptocurrency market as a whole over $1 trillion USD.
Why did Bitcoin reach this astounding price?
One reason is that publicly traded companies have started to invest in bitcoin (Business Insider).
First, Microstrategy (MSTR) bought $425 million into bitcoin in August 2020 (purchased 21,454 BTC) and in September 2020 (purchased 16,796 BTC).
Next, Square (SQ) bought $50 million of bitcoin in October 2020 (purchased 4,709 BTC). They reported that this investment into bitcoin represented 1% of their total asset at the end of the 2nd Quarter 2020.
Then PayPal (PYPL) adopted bitcoin, announcing that they will allow its hundreds of millions of users to buy, sell, and hold bitcoin in their PayPal account.
Most of the Internet Misquotes JPMorgan without Proper Context
On January 5, 2021 the internet was buzzing with the quote that JPMorgan "said bitcoin could rally as high as $146,000" but these articles and sources are largely not giving the full context of the JPMorgan quote. As a result of the JPMorgan quote, many more people have invested into bitcoin because they think they will get rich from the cryptocurrency.
For clarification, JPMorgan said for bitcoin to reach gold status, it would need to reach $2.7 trillion in private sector investment, which is the current amount the private sector has invested in gold. To achieve this level of investment, bitcoin would need 4.6 times the current private sector investment of $575 billion. It is also important to note that $575 billion was accurate at the beginning of the year 2021, and after one week in January 2021, the private sector market cap had already grown to $775 billion (CNBC).
In the video (posted below), you can see Dan Roberts from Yahoo! Finance discuss the full context of the JPMorgan note, which says that if bitcoin could prove out its thesis as becoming a "digital gold", then it has the potential to reach $146,000. But the truth is that JPMorgan ends with the thought that they don't believe that it is likely to happen (Yahoo Finance).
The concept of digital gold is referring to established companies investing into bitcoin and holding it long term in the same way gold has been invested in historically.
Yahoo Finance explains "Bitcoin could surge to $146,000" JPMorgan quote
Alternative Viewpoint: Bank of America Chief Investments Strategist is Skeptical of Bitcoin
To offer one alternative viewpoint on bitcoin, CNN published an article referencing the Chief Investments Strategist, Michael Hartnett, who thinks we could be seeing "the mother of all bubbles" with bitcoins record surge over $41,000 USD.
Hartnett points out that bitcoin's historic rise - specifically an increase of over 1,000% since January 2019 - is "far greater than the gains for any other asset that has had a massive runup in the past few decades." This takes into account gold's 400% surge in the 1970's, Japanese stocks in the late 1980's, dot-coms in the 1990's, and housing prices in the mid-2000's that all saw triple percentage gains before a large crash in prices (CNN Business).
The following sources were used in researching this article:
Business Insider. "3 reasons why bitcoin has doubled in less than a month - and why experts think it won't repeat its 2017 crash" Article URL: https://markets.businessinsider.com/currencies/news/bitcoin-price-btc-performance-explanation-cryptocurrency-market-crash-token-investing-2021-1-1029945005
CNBC. "JPMorgan says bitcoin could rise to $146,000 long term as it competes with gold" Article URL: https://www.cnbc.com/2021/01/05/jpmorgan-bitcoin-price-could-rise-to-146k-as-it-competes-with-gold.html
CNN Business. "Bitcoin rally may be the 'mother of all bubbles' says BofA" Article URL: https://www.cnn.com/2021/01/08/investing/bitcoin-bubble/index.html
Yahoo! Finance. "JPMorgan: Bitcoin could surge to $146,000 in long term, but there is a lot of 'ifs'" Video URL: https://www.youtube.com/watch?v=yQDKSu5kxXM