Strategist Lyn Alden said it went from “disinterested to pretty bullish on Bitcoin” in 2020. After BTC fell to $ 3,600 in March, it remains optimistic about the top cryptocurrency.
Alden, who founded the Lyn Alden Investment Strategy, wrote:
Therefore, I am neither a permafalist in Bitcoin at any cost, nor someone who completely excludes this. As an investor in many asset classes, these are the three main reasons why I switched from being uninterested to fairly optimistic about Bitcoin earlier this year and still am today. “
The three reasons Alden put forward are Scarcity, halving and the potential of Bitcoin as a backup against inflation.
Unlike traditional financial assets, including gold, Bitcoin supply is firm. There cannot be more than 21 million BTC, which makes Bitcoin a deflationary currency.
The shortage could add value to Bitcoin, Alden explains in his article. There are no central bodies that could change BTC’s monetary policy. If the demand for Bitcoin continues to increase and supply remains the same, it could add value.
“The Bitcoin protocol limits it to a total of 21 million coins, which makes it scarce and may therefore give it value … if needed.”
The scarcity of Bitcoin alone does not add any value to BTC. There has to be market demand to support this. But There are other features of Bitcoin, such as fungibility, portability, immutability, and decentralization, that make it a practical store of value..
Bitcoin continues to dominate over thousands of cryptocurrencies in the market. In terms of market cap, Bitcoin accounts for 62.4% of the total cryptocurrency market cap. This figure includes currencies whose liquidity may not be sufficient to warrant their valuation.
The dominance of Bitcoin and thus the network effect make the top cryptocurrency even more convincing as a long-term savingSaid Alden.
Bitcoin’s Domain Index. Source: CoinMarketCap.com
Halving of May 11th
On May 11, the Bitcoin blockchain was halved for the third time. Halving occurs approximately every four years, slowing BTC production by half.
The purpose of halving is to gradually lower the production rate of BTC when Bitcoin reaches its maximum supply of $ 21 million. Halving halves the rewards miners receive, resulting in a massive drop in miners’ income for a short time.
After each halving, Bitcoin historically showed continued price increases. The previous halving was in 2012 and 2016. At this point, BTC was around USD 11 and USD 650 in 2012 and 2016, respectively. Now, BTC remains above $ 9,000 after hitting a record high of $ 20,000 in December 2017. Alden wrote:
“Bitcoin has historically developed very well in the 12 to 18 months after the start and after the first two halves. Given the constant or growing demand for coins, it is not surprising, given the constant or growing demand for coins, that the price tends to push up. “
The price of Bitcoin with the data of the halving. Source: Blockchain.com, Lyn Alden
Bitcoin’s historical performance after earlier halving increases the likelihood of another sustained upward trend.
Support high inflation
In May 2020 billionaire hedge fund investor Paul Tudor Jones praised Bitcoin and described it as “great speculation”.
Tudor Jones said he had just over 1% of his net worth in Bitcoin. He explained that A possible devaluation of the cash strengthens the value proposition of BTC. Said:
“Every day Bitcoin survives, trust in Bitcoin increases.”
So did Alden Other hedge funds have recently invested in or experimented with Bitcoin.
“The smallest hedge funds have already dealt with Bitcoin, and Tudor Jones may be the largest investor to get into it so far. Now there are companies that offer services to get institutional investors on board Bitcoin, be it hedge Funds, pensions, family offices or RIA companies. “
Key metrics such as the Grayscale Bitcoin Trust (Btc) (AUM )’s assets under management indicate that institutional activity on the Bitcoin market is increasing. Data shows that the Btc AUM is now at $ 3.55 billion, about $ 500 million more than during the 2017 peak.
The managed assets of the Grayscale Bitcoin Trust. Source: YCharts.com
The confluence of Reaching the fixed supply of BTC 21 million, an upward trend after halving it, and increasing institutional activity could benefit Bitcoin’s long-term price development.