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Can Bitcoin prices reach $ 130,000 in 2021? What Coinbase’s listing tells us
‘Bitcoin is dead’, a prominent cryptocurrency investor declared in late 2018. 18-year-old Erik Finman became a BTC millionaire that year. But because the prices of Bitcoin (CCC: BTC-USD) fell by 75%, he could not even shake the feeling that the story of the cryptocurrency was over. Source: Shutterstock Today, the mood can not be otherwise. Since the collapse of 2018, Bitcoin prices have risen by 1,600%. This week, it hit a high of $ 63,729.50, urging investors to add millions more in crypto funds. (It seems that Mr. Finman kept his initial investment). At the heart of Bitcoin’s success was Coinbase (NASDAQ: COIN) and other crypto exchanges. These intermediaries actually eliminate the high cost of the Bitcoin transaction by matching orders from the blockchain. It also makes it possible for those without coding experience to open wallets and buy money from others. InvestorPlace – stock market news, stock advice and trading tips The importance of the stock market is hard to overstate; when Coinbase listed earlier this week, The Financial Times saw it as a ‘coming of age’ moment for cryptocurrency. (The New York Times took it a step further and called it an ‘outgoing party’, despite the relative asexuality of the cryptocurrency). 10 stocks to buy for your $ 5,000 Robinhood portfolio However, bullishness is a growing problem: the same factors that helped Bitcoin succeed are now doing the same for its competitors. Although the largest crypto in the world could still rise to $ 130,000, the listing of Coinbase means that the case for smaller altcoins is growing even faster. Bitcoin prices up to $ 130,000? It’s possible … Cryptocurrencies have long confused traditional Wall Street analysts. Bitcoin does not generate earnings, nor is it useful as a medium of exchange; its average blockchain confirmation time can range from 80 minutes to almost two days. But Bitcoin has only succeeded for one reason: people want to make a profit. “Bitcoins are used primarily as a speculative investment,” researchers wrote in the Journal of International Financial Markets, Institutions and Money. “And not as an alternative currency and exchange.” That core of truth has driven crypto exchanges like Coinbase to billions of dollars in valuations. Today, COIN shares are worth more than the latest private market values of TD Ameritrade, E-Trade and Robinhood combined. Its first-quarter revenue of $ 1.8 billion and 40% to 45% profit margins make it one of the fastest growing and most profitable businesses in the United States. Bitcoin has also benefited from the success of Coinbase. As major exchanges increase their security, high-profile crypto thefts are becoming increasingly rare. Regular investors pushed the currency to a staggering $ 1.1 trillion market capitalization, easily ousting the Japanese yen as the third largest currency in the world. JP Morgan now has a target price of $ 130,000 BTC, which is a 100% increase from today’s levels. … But lessons from Coinbase Say Beware, venture capitalists will immediately spot a problem. Bitcoin rises to $ 130,000 is much like Coinbase which reaches a market capitalization of $ 150 billion. It is possible, but it becomes increasingly difficult to achieve as the addressable market becomes saturated. To meet JP Morgan’s expectations, Bitcoin will have to exceed the US dollar in size. Ark Invest’s $ 470,000 price tag will make Bitcoin worth more than all the gold still mined. Sometimes prices rise above their potential market value. During Japan’s real estate peak in the early 1990s, Japanese banks began lending to companies based on how much real estate the borrowers owned, rather than the strength of their underlying business. At its height, the value of the Tokyo Imperial Palace was theoretically worth more than the state of California. But these bubbles usually burst into a phenomenal display of fireworks and ‘I told you so’ tongue-swinging. In a world where economic substitutes exist, competitors will always be a challenge to slower-moving incumbents. Heat competition for Bitcoin Coinbase highlights these issues perfectly. The exchange started almost a decade ago by offering only Bitcoin, and ironing out the technological shortcomings of the currency with a user-friendly interface and efficient trading mechanisms. Users no longer have to code their wallets or struggle to find sellers on the Dark Web. Even the high fees of Bitcoin (which today can amount to $ 23 per transaction) have been reduced to pennies thanks to order grouping. But supporting Coinbase cuts both ways. In 2016, the exchange provided support for Ethereum (CCC: ETH-USD), a competitive currency that now dominates NFTs. By the end of the decade, Coinbase would add another 50 altcoins to its list of tradable assets. Today, investors have a staggering choice of cryptocurrency investments. Small currencies such as TRON (CCC: TRX-USD) and EOS (CCC: EOS-USD) now see daily volumes that are against the 2019 figures of Bitcoin. Meme coins such as Dogecoin (CCC: DOGE-USD), which is not yet traded on Coinbase, now have as much support for competitive exchanges as investors have managed to make it the fifth largest currency in the world this week. In other words, the exact mechanisms that forgave Bitcoin’s technological shortcomings are now doing the same for its competition. A figure sheet of security institution investors did not receive the memorandum. With each jump in the Bitcoin price, a large chunk of Wall Street stayed for more profits. Investment bank Morgan Stanley is now offering BTC funds to its wealth management clients, while prominent investors have demanded even higher prices. Yet it is easy to confuse ‘big’ with ‘low risk’. Bitcoin theoretically has no intrinsic value yet, so a decline in short-term volatility means nothing about the underlying systemic risks. Meanwhile, newer currencies such as Cardano (CCC: ADA-USD) and Polkadot (CCC: DOT1-USD) now offer energy-efficient “proof-of-stake” (PoS) protocols that reduce energy consumption by more than 99%. And thanks to the help of cryptocurrency exchanges, smaller entities like Dogecoin are becoming viable alternatives. Bitcoin can survive a crypto crash better than its peers, but its bottom line is eating away at its one-sided upside bet. How high can Bitcoin go? A lesson from the market In 1910, Standard Oil was the most valuable company in America. Adjusted for inflation, it would have been worth $ 1 trillion today. Yet the firm’s spinoffs – a collection of Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX) and others – are no longer dominated by Wall Street as John Rockefeller’s firm once did. Many historians can describe the expulsion of the oil giant in 1911 as its turning point. The resulting 34 companies are deliberately designed to compete. But in reality, investors know that it was the rapid rise of Standard Oil that laid the groundwork for its decline decades later. With the breakdown, the energy giant became so large that it would keep up with the annual returns of the US stock market by 10%, the share would be worth $ 500 trillion today. That’s five times more than all U.S. stocks and real estate combined. Such a valuation is impossible. No asset can be greater than the market it serves. Today, Bitcoin falls into the same bucket. It’s by size the dominant player – more than half of the entire cryptocurrency is still Bitcoin. But as altcoins continue to gain traction on Coinbase and other crypto exchanges, Bitcoin will find it increasingly challenging to maintain its incredible growth. So remember that it is altcoins, not Bitcoin, that can offer the 10x, 20x or 50x returns when you want to buy a cryptocurrency afterwards. Maybe Bitcoin’s Erik Finman looked like Bitcoin was dead after all – he was just a little early on his call. At the date of publication, Tom Yeung held no (direct or indirect) positions in the securities referred to in this article. Tom Yeung, CFA, is a registered investment advisor who wants to promote the simplicity of the investment world. More from InvestorPlace Why everyone invests in 5G, all wrong. It does not matter if you have $ 500 savings or $ 5 million. Do it now. The best stock voter unveils his next potential 500% potential winning product that NIO found at $ 2 … Say Buy IT Now The Post Can Bitcoin Prices Achieve $ 130,000 in 2021? Which Coinbase presentation tells us first appears on InvestorPlace.