Crypto-Mania Resurrected

The Investment Asset of the Century Makes yet another Comeback

Even the most ardent cryptocurrency bulls are probably slightly slack-jawed at this juncture and can hardly believe it. To be sure, many people were undeterred by the vicious bear market that saw BTC meltdown from just below $20,000 in Dec. 2017 to less than $3,300 in Dec. 2018, but we doubt that even these steadfast believers in the grand-daddy of cryptocurrencies expected to see new all-time highs in less than two years. Oh well…

Look who’s back from the dead…

BTC, weekly – who says a bubble cannot be resurrected in two years' time?

The nice thing about cryptocurrencies like Bitcoin is of course that no-one has the foggiest idea what they should be valued at. All that is known in the case of BTC (apart from the undeniable technological progress the blockchain represents) is that it has a fixed supply. Apparently, that means that any fantasy number can be thrown out by forecasters, and they are definitely not shy about doing just that.

In fact, analysts are beginning to trip over each other with ever more aggressive predictions. Deutsche Bank has e.g. recently arrived at a price target of $318,000 for BTC – one-upping a number of vertigo-inducing price targets announced previously by its competitors. The current rationale/narrative is that institutional adoption of cryptocurrencies as a viable asset class is bringing in a flood of money, which in light of the fixed and fairly small supply can only drive prices higher.

So far, so correct – this is indeed what has happened in recent weeks. Many well-known investment funds and several listed companies have purchased BTC or have announced plans to do so and BTC has rallied with gusto.

Nevertheless, the sudden rush by mainstream financial institutions to embrace BTC must be considered worrisome for the bullish case. Readers may remember that the 2011 peak in gold prices was also preceded by a sudden flood of mainstream endorsements.

Driving Forces

Meanwhile, a new trend has taken the place of the ICO craze of 2017: decentralized finance, a.k.a. DeFi, has made quite a splash this year. It is proving to be quite a bonanza for all involved. Interesting new blockchain projects have been thrust into the limelight in the process (all of which come with their own tradable tokens, natch).

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