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Let’s take a look back on Bitcoin’s craziest week in 2020

Photo of: Nathan VDH
by Nathan VDH

While the goal of a new historic summit seemed to elude Bitcoin only last week, Bitcoin quickly reminded us that it is capable of the widest of movements, in either direction. The old peak of $19,900 USD on December 16, 2017 was shattered on Wednesday, exactly three years to the day later. Unsurprisingly, this led to a veritable fireworks display, with the price improving by almost 20% in the 24 hours that followed. The price finally found a temporary peak followed by a first natural profit taking.

Slowly at first, then suddenly all at once. This new high is certainly not unrelated to the influx of institutional capital into the cryptocurrencies market. This week it was the turn of the English investment firm Ruffer to make a massive investment of $744M in Bitcoin, or 2.7% of the funds managed by the company. This is a purchase of approximately 45,000 Bitcoin. According to the firm, the investment was “mainly a move to protect portfolios” to “act as a hedge” against “some of the risks we see in a fragile monetary system and distorted financial markets.

The significant One River hedge fund did the same, quietly buying $600 million in cryptocurrencies recently it was announced. One River Digital Asset Management has made commitments that will bring its holdings in Bitcoin and Ethereum to approximately $1 billion by early 2021.

JP Morgan’s strategists have emphasized the significant effect of these institutional investments on the digital currency market. In connection with MassMutual’s $100 million investment last week, a note sent last Friday noted that “MassMutual’s purchases of Bitcoin represent another significant step in the adoption of Bitcoin by institutional investors. We can see the potential demand that could appear in the coming years as other insurance companies and pension funds follow MassMutual’s lead.”

The American giant Grayscale alone may be enough to explain the huge demand for Bitcoin that the supply is no longer sufficient to satisfy. In fact, the company’s bitcoin reserve is now estimated at $11.1 billion. This is 2.7% of the total supply of the currency. Last week alone, the firm’s reserve grew by 56,000 BTC. 84% of all GBTC buyers are institutional investors.

Speaking of giants in cryptocurrencies, it should be noted that the American exchange Coinbase has just filed the preliminary documents for a public offering. Subsequently, the research firm Messari estimated the value of the company at $28 billion. In providing this valuation, the analyst emphasized the importance of such a significant IPO in the field of cryptocurrencies. “This listing is significant, even for the valuation of tokens, because Coinbase will provide an anchor point for valuation – not only for future stock quotes – but also for crypto-native exchange tokens”.

What should be the fair value of a Bitcoin? Scott Minerd of Guggenheim Investments gave his opinion this week. The scarcity of Bitcoin combined with “creeping currency printing” by the Federal Reserve means that the digital currency token should eventually rise to about $400,000,” he said in an interview with Bloomberg. This assessment “is based on the scarcity and relative valuation of things like gold as a percentage of GDP. You know, Bitcoin actually has many of the attributes of gold and at the same time has an unusual value in terms of transactions. He goes on to say.

In this week’s news week, it is impossible not to highlight the announcement by the CME Group of the launch of futures contracts based on Ethereum. The product will be launched on February 8, subject to regulatory approval. It will be settled in cash and based on the company’s CME CF Ether-Dollar reference rate. According to CME’s website, one contract will be equivalent to 50 ETH.