Bitcoin (CCC:BTC-USD) has really found its stride, delivering gains that long-time investors have been waiting for after its exponential rally in 2017. With any luck, more gains are on the way this year.
A few years ago, Bitcoin ran from a few hundred dollars to almost $20,000 by the end of the year. But then the cryptocurrency “bubble” finally popped, and the price fell lower.
Bitcoin ultimately bottomed near $3,100 a year later, as the cryptocurrency lost about 85% of its value. While incredibly painful, it’s what we needed to see. There needed to be a total washout in the crypto space, as speculators were plowing into the digital currency for short-term gains.
This often overlooked observation also yields an interesting perspective: Although Bitcoin fell more than 80% from December 2017 to December 2018, it was still up nearly 300% over the prior 24 months.
Now at $60,000, Bitcoin’s run is far from over.
Why Bitcoin Can Go Higher
I believe bitcoin can go higher for several reasons, starting with awareness and access. While the cryptocurrency garnered plenty of attention in 2017, there was not great access to it. The same goes for the entire cryptocurrency space.
Fast forward a few years and that has changed quite a bit. Investors can buy Bitcoin through apps on their phone — like Square Inc.’s (NYSE:SQ) Cash App for instance — or brokerages like Robinhood. They can also purchase through crypto-specific accounts, like Coinbase.
That’s vastly different than a few years ago, when exchanges were constantly being hacked and bankrupted. The system is more trustworthy now, with more access and even futures contracts available for trading. Over time, that access will only improve.
However, it’s not just about where investors can buy Bitcoin, but who is buying it.
In 2017, speculators were driving it higher. Now in 2021, corporations are getting involved. Several companies have now allocated billions of dollars into Bitcoin. With it having the largest market value and best liquidity in the crypto space, it’s the most logical one for corporations to allocate to, provided they want crypto exposure.
As more companies allocate a percentage of their assets and/or cash holdings to Bitcoin, it will drive the price higher. By design, this cryptocurrency has a limited supply coming to market, so as demand increases, it only leaves the price with one direction to go: up.
Safer access to Bitcoin and bigger buyers are the current catalysts. However, future catalysts exist too.
For instance, as retailers and merchants increasingly warm up to Bitcoin, it will only make it that much more desirable for consumers to own some. We’re already seeing investors and consumers deciding that it’s prudent to have at least some of their cash in digital currencies.
It’s why clients at Goldman Sachs (NYSE:GS) will likely soon gain access to crypto funds and why Morgan Stanley’s (NYSE:MS) clients were recently offered exposure. This is the future direction of the crypto market.
The Bottom Line on Bitcoin
Click to Enlarge
Another reason Bitcoin can go higher? It’s coming out of a higher base. While it’s already had a big run, it’s not anything like we saw in 2017. At its peak, it had a one-year gain of more than 2,300%.
Since clearing its prior high from 2017, Bitcoin is up only around 200%. Obviously that’s a big move, but it’s much more sustainable than the exponential explosion we saw a few years ago.
If Bitcoin were going to fail, it would have happened after the 2018 implosion. If that couldn’t kill it off, it doesn’t seem like anything can. Plus, as its market value nears $1 trillion, is it getting too big to fail?
Finally, the technicals are lined up as well. Remember, we don’t use the technicals to make our long or short case. However, I do like when the technicals enhance our position, rather than act as a detriment.
Bitcoin is in the process of breaking over $60,000. After tagging the 50-day moving average a few weeks ago, it’s been on fire since. Now pushing into this breakout zone, look for a potential move to the current high, up around $61,700. Above that could open the door to an extension towards $67,600.
On the date of publication, Matt McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article held a long position in Bitcoin.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now.
