Bitcoin has soared in recent months, smashing through its 2017 highs and entering price discovery for the first time in three years.
The bitcoin price hit $42,000 per bitcoin earlier this month before falling back, up around 300% since early October. Bitcoin’s price is currently trading around $36,000, giving bitcoin a total value of $680 billion.
Now, billionaire investor Mark Cuban, who famously said he’d rather have bananas than bitcoin, has warned crypto traders to watch for a rise in interest rates—but thinks the emerging decentralized finance (DeFi) market could change the game for crypto.
“Bitcoin is moved by institutional investors globally,” Cuban said via email. Bitcoin has found support from big-name and institutional investors over the last year, with some buying bitcoin to hedge against the inflation they fear will materialize as a result of the coronavirus pandemic stimulus measures.
However, Cuban doesn’t expect U.S. President-elect Joe Biden’s $1.9 trillion coronavirus stimulus package, and continued bond-buying by the Federal Reserve, to have much effect on the bitcoin price in the short term.
“The whole narrative of the debt impacting pricing is only real if interest rates go up and by how much,” Cuban adding “that’s when we can see the price of all assets impacted.”
Fed chair Jerome Powell this week squashed fears interest rates could begin to move higher sooner than expected, indicating it’s too early to talk about making any changes to the central bank’s dovish monetary policy. The Fed plans to keep interest rates near zero until inflation has risen to its 2% target.
Stock markets have climbed steadily since the March coronavirus-induced crash, with investors piling into companies such as Tesla
“[Bitcoin] is just like any stock,” said Cuban. “It’s price is driven by supply and demand.”
However, Cuban does see the bitcoin and cryptocurrency industry as evolving, naming DeFi—the idea bitcoin and cryptocurrency technology can be used to recreate traditional financial instruments such as loans and insurance—as potentially changing how the bitcoin and cryptocurrency market behaves.
“I do think that DeFi could change [what drives bitcoin] in a variety of ways, but it’s too early for it to be a significant impact,” Cuban added.
Investors have poured around $22 billion into DeFi projects over the last year, according to data from DeFi Pulse, up from under $1 billion just over a year ago.
Meanwhile, bitcoin’s 2020 rally has vindicated long-time bitcoin and cryptocurrency supporters who are feeling upbeat heading into 2021.
“Bitcoins are valuable now because they have properties that make them conducive to fulfill the function of money. The more useful bitcoins become as money in the future, the more valuable they will become,” Chris Bendiksen, head of research at London-based digital asset manager CoinShares, said in emailed comments, adding “bitcoin valuation is clearly a topic that is being carefully considered by the investment elite.”
Bendiksen said he expects bitcoin to eventually overtake gold’s near $12 trillion market capitalization, pointing to its growing popularity in recent years.
“Year after year, bitcoin’s relational properties such as liquidity keep improving while the fixed properties such as its scarcity, privacy and transactability over telecommunications channels do not suffer any deterioration. This trend is consistently making bitcoin increasingly useful as money, which we believe will cause it to capture an increasing share of the global monetary market.”
Others have echoed this, arguing the maturing bitcoin market is increasingly similar to traditional asset classes.
“There is sustained and growing interest in the likes of bitcoin from both retail and institutional investors,” Nigel Green, the chief executive of financial advisory grouop deVere, said via email.
“They are now increasingly handling the assets as they would any other asset in the portfolio—for example, sometimes profit-taking, sometimes reinvesting, using the volatility to their advantage, and using these alternatives to help with all-important diversification.”
The post After Huge Bitcoin Price Rally, Here’s What Billionaire Mark Cuban Thinks Is Next For Bitcoin And Crypto appeared first on TechFans.