Earlier this week, Bitcoin breached $10,000 and since then we have been keeping above this level.
The digital asset is up 40% in 2020 so far and according to Michael Novogratz, the founder, CEO and chairman of Galaxy Digital that invests in cryptocurrency, it could further continue its upward trend and “by the end of the year we certainly take out the old highs.”
Bitcoin started climbing up last year after losing 84% of its value in 2018 from the high of $20,000 hit during the 2017 bull run.
“Right now bitcoin feels a little frenzied,” Novogratz said on CNBC but feels a new high of $20,000 could come as soon as the havening in May 2020.
Bitcoin is a Social Construct
During his interview, he emphasized that Bitcoin is becoming a store-of-value, as compared to other crypto assets. “Coming out of the ashes, bitcoin has really developed its own lane as a store of value.”
He further explained that gold has got three thousand years and ten trillion dollars behind it. Bitcoin he said is probably the best new brand in the last eleven years,
“Two hundred billion dollar market cap for the line of code that came out 11 years ago. It's a social construct, it's nothing technical.”
Barrel of Liquidity Driving Stocks, Gold, & Bitcoin
As for what’s driving Bitcoin, the former Goldman Sachs macro trader said it’s the monetary stimulus around the world, particularly in China in response to the deadly coronavirus. Novogratz said,
“The Chinese are about to pull two giant bazookas out and stimulate the heck out of the second-largest economy in the world.”
“That’s going to be good for Chinese stocks at one point, but that stimulus always finds its way around the world.”
And the same “liquidity” is driving Bitcoin, with global rates low and people pumping in money with the Chinese government preparing for round two. This barrel of liquidity is not only driving stocks but crypto and gold as well.
As we reported, analyst Mati Greenspan and analyst PlanB share the same opinion that the government printing money is what’s driving the bitcoin rally.
But bitcoin didn’t react to this liquidity every time central banks pumped money in the market during the last eleven years because the market is maturing. Additionally, the likes of Bakkt from Nasdaq’s parent company ICE and Fidelity are adding plumbing through crypto custody solutions to allow people to feel more comfortable holding Bitcoin.
Belief in Store of Value
Some may believe in the monetary theory but Novogratz says gold’s movement shows, not everyone does. As we have seen “with stocks at an all-time high gold shouldn't be trading as well as it does,” but the precious metal has been trending up as well.
Gold climbed to its peak in late 2011 at just above $1,800 per ounce to drop to $1,064 in Dec. 2015 has been on the rise ever since, currently at seven-year highs at $1,583 per ounce.
And Bitcoin is a version of gold, “it's just on steroids because it's an early adoption.” That’s why Novogratz feels Bitcoin’s new high could come as soon as in the next few months.