Will 2021 be the year of bitcoin?

After the irrational fever of winter 2017, the best-known cryptocurrency has returned to maximum values. But this time the scenario is completely different.

Bitcoin (Getty Images) After reaching its new all-time high for a few tens of dollars ($ 19,800 recorded on December 1st), bitcoin immediately collapsed by almost 10% . Nothing unexpected, considering that still in March of this year - in the midst of the first pandemic wave - the best-known among cryptocurrencies was still worth just over 5 thousand dollars. After a growth of 300% it was inevitable that some of the investors would decide to sell to pocket the profits, thus bringing the price down.

Over the past few days, each new peak has been followed by a sale that has caused value to drop, while each collapse has triggered new purchases that have immediately made it rise again. No one can predict where the value of bitcoin will go when this highly volatile phase has passed. But one thing is certain: the rumors about the death of the digital currency created by the anonymous Satoshi Nakamoto in 2008 were definitely exaggerated

On the other hand, Bitcoin has been given up for dead hundreds of times, promptly cataloged by special sites. And every single time it has shown that it knows how to rise from its ashes, even after the feverish bubble three winters ago, when the price went from $ 700 in December 2016 to $ 19,700 in December 2017, and then plummeted to $ 3,500. A real roller coaster, traveled even more extreme by bitcoin's more famous cousins ​​- Ethereum, Ripple, Litecoin and others - and by an endless series of speculative and / or scam projects all too similar to chain letters .

A new wind

The recovery of bitcoins is now complete and several other cryptocurrencies (starting with Ethereum, also driven by the new DeFi phenomenon, decentralized finance) are on the right track. The prices are similar, but the context surrounding blockchain-based coins has completely changed. "Bitcoin is now fueled by much less feverish speculation", wrote Nathaniel Popper of the New York Times, also author of the classic Digital Gold: "Buyers - led by companies and other traditional American investors - are treating bitcoin as an asset alternative, more or less like gold ".

A completely different situation from the bubble of 2017, which was fueled by improvised Asian investors and which after a dizzying growth burst as soon as it was realized that - in the real world - this currency had no real purpose (if not buying drugs and weapons on the darkweb or paying hackers who attack ransomware). A full-blown speculative bubble, devoid of any rational economic foundation.

But why is the situation so different today? "What the nature of bitcoin is is yet to be understood," explained Ferdinando Ametrano, scientific director of the Crypto asset lab of the Bicocca University of Milan, where he teaches Bitcoin and blockchain technologies, and founder and CEO of the cryptocurrency custody service Checksig. during the last Wired Trends Finance: “But its scarcity in the digital field suggests the comparison with gold rather than with money. Of course, it can also be used as a currency, just as it once happened to physical gold. But the use of gold in this sense has been overcome and the same will happen with bitcoins, which do not perform well the function of money and instead can represent a valid safe haven ".

Digital gold

The parallelism between gold and bitcoin is nothing new. Both must be extracted (in the first case from the mines, in the second with the computer process known not by chance as mining). Their value is unrelated to the trend of monetary or stock exchange policies (based only on the law of supply and demand). They cannot be printed in unlimited quantities and are not affected by interest rates. If this were not enough, bitcoins will never be able to go beyond 21 million units and to date about 19 million have already been mined, which differentiates it from money by making it more like a precious material scarcely present in nature.

It is the greater understanding of what the true function of bitcoin could be - becoming a safe haven asset like gold - that has contributed to the different approach of investors. "Instead of trading it as quickly as possible, investors are using it as a place to park a portion of their investment portfolio, outside the influence of the government and the traditional financial system," reads a recent analysis by Chainalysis.

Traditional observers

Among these new players in the world of cryptocurrencies there are also the most important global players: Paul Tudor Jones, one of the main Wall Street hedge fund managers, has to know that it had invested about 2% of its portfolio in Bitcoin as early as May of this year, also to escape the possible decline in traditional currencies caused by the public spending necessary to keep the economy afloat in the pandemic.

In October, it was JpMorgan Chase who stated that bitcoin was becoming a valid alternative to gold and that the attention of millennials made it a market with great potential. Not only that: considering that the total value of bitcoins at the moment is about 350 billion dollars, and that of gold is estimated at 10 trillion, it is not absurd to imagine that the consolidation of bitcoin as a safe haven could significantly increase its value.

But the story of the (possible) future of bitcoin does not end there, because there are other potential developments that are starting to make their way. First of all: a giant like PayPal (350 million users worldwide) announced at the end of October that starting from 2021 its platform can be used to buy and store cryptocurrencies, and also to make payments (which will be converted by PayPal itself in traditional currency).

It is difficult to underestimate the importance that the entry into this world of one of the protagonists of the digital economy can have. "PayPal opens to a huge audience thanks to its simplified procedures, this is undoubtedly a crucial point that is acting as a flywheel", continues Ametrano: "It is the law of the market: when PayPal sees that a smaller competitor like Square is doing gigantic profits thanks to bitcoins can only adapt ". From this point of view, Jack Dorsey - founder of Twitter and Square - had in fact seen us right, introducing the use of bitcoins already in 2018 and recently seeing the part of his turnover linked to cryptocurrencies grow by 600%.

If that wasn't enough, banks in the US are expected to soon be able to buy and hold cryptocurrencies for their customers, while traditional cryptocurrency exchanges - such as Kraken - have been licensed to bank. After the irrational bubble of 2017 are we witnessing the first stirrings of bitcoin as a real institutional player? Difficult to say, but one thing is evident: every time the best-known cryptocurrency is reborn, trust in it can only increase.