Bitcoin price reaches $40,400, what is going on in the market?

The bitcoin (BTC) price shot up to over $40,000 earlier tonight. That’s double the old record of 17 December 2017 and also double the December 2020 price, exactly three years later.

In less than 22 days, the value of bitcoin has doubled. Three weeks ago the price really went through the ’20k‘ for the first time, now the price is around $40,000.

Just after the price set this new record, it did fall sharply. In the meantime part of this decline has already been bought back, as can be seen in the (daily) chart below.

Bitcoin price

As a result of the rebound, the price changed today by $5,000 in one day. How should you look at this rise?

Is it too late to buy, or should you sell? Of course it all remains glass-to-bulb looking and speculation, but there are some things to be said about this situation.

Sui Chung is the CEO of CF Benchmarks, a company that supplies indices for the CME says the following to Cointelegraph:

„No one can deny that we are seeing a new asset class in the making. This is the moment when every company and individual is seriously considering how to deal with cryptocurrency“.

Bitcoin is a monetary revolutionary system. If you’re hesitating to buy over sell, keep in mind that the crypto currency was conceived for the ultra-long term. Market cycles last for years and digital scarcity is still in its infancy.

Big profits in the short term are certainly possible, but Bitcoin was conceived as a means to save (to hodge) and not to trade.

On-chain analyst Willy Woo adds another analysis. The recurring story is that institutional parties are buying. But according to them, it’s the smaller parties like family offices that are buying.

Sentiment changes fast

Barry Silbert of Grayscale clearly shows how hard the sentiment turns. Where the community had been looking forward to the old record of $20,000 for three years, this price now feels like the time to ‚buy the dip‘.

As far as the price is concerned, Bitcoin is now in ’never before entered territory‘. This is also called price discovery. Mati Greenspan of Quantum Economics writes the following about this:

„Graphs only tell us the past. We are now in a brand-new territory. This bull run started at $10,000 and typically a 10x increase from the previous all-time high seems to be the norm for a bitcoin bull cycle.

So we are only halfway there with extremely good momentum, high volumes and exceptionally strong fundamentals“.

Fundamental value

What does Greenspan mean when he talks about fundamental value? The answer once again lies with digital scarcity.

Where the maximum amount of bitcoin in the protocol is 21 million, and the inflation number halved in May 2020, the opposite is happening in the world around us.

Credits are being issued at a pace never before seen. For example, the balance sheet of the U.S. Central Bank increased by more than 22% this year.

The smart money is looking for opportunities to keep their assets for the long term; a hedge. The digital gold seems to be a hot item for this.

Large investors, insurers and asset managers such as Guggenheim, MassMutual and Stone Ridge stepped in with millions at a time. However, these same fundamentals are now permeating retail investors: bitcoin is not for criminals, it is a modern way of saving.

Attention blown

On the other hand, it looks a lot like a bubble. David Lifchitz, CIO of asset manager ExoAlpha, therefore gives a warning: „Bitcoin rises too fast and evokes memories of the dotcom tree“. But on the other hand: the Internet is now an integral part of society.

Finally, a warning: the market is currently very volatile. Earlier this week, the price plummeted by 20%, a drop that was reversed within a few hours. As now around $40,000, the price dropped immediately by almost $4,000.