Bitcoin Explodes Above $33K As Supply Squeeze Continues

Well, that escalated quickly. Less than an hour after first breaking above $30,000, Bitcoin (BITCOMP) has spiked beyond $31 thousand, then $32 thousand, and more recently, $33 thousand.

Source: Bloomberg

Source: Bloomberg

Ethereum (ETH-X) is also extending gains, nearing $780, but BTC has been trading at almost 42x ETH - its highest since May, erasing much of the decentralized finance boom's effects on Ethereum.

Source: Bloomberg

But while the cryptocurrency is rising in value against the dollar, Bitcoin price claimed another all-time high, this time against gold, offering further confirmation that demand for digital assets is on the rise.

Source: Bloomberg

Bitcoin’s biggest proponents believe the digital currency is eating away at gold’s market cap as investors opt for the efficiency, portability, and proven scarcity of the asset. Astonishingly, that view is also shared by JPMorgan Chase analysts, who believe bitcoin’s digital gold narrative is drawing capital away from precious metals.

Additionally, as CoinTelegraph notes, some believe that Bitcoin’s supply squeeze could send prices higher over the course of 2021. Specifically, digital asset manager Grayscale (GBTCbought up nearly three times the BTC mined in December. Demand from PayPal (PYPL), Cash App, and others has also contributed to an apparent supply shortage of BTC.

It's official: Miners can't produce enough bitcoin

Last month, the company added a total of 72,950 BTC ($2.132 billion) to its assets under management (AUM). During the same period, miners generated just 28,112 BTC ($821.7 million) — 38.5% of Grayscale's buy-in. The figures underscore what many have described as an ongoing liquidity squeeze in bitcoin, where large buyers suck up any available supply and remove it from circulation, sending it to cold storage for long-term holding.

As Cointelegraph reported, the phenomenon was already visible in November 2020, but December 2020 saw a clear increase in demand from Grayscale and other institutional entities.

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