• Bitcoin surged past $23K on Tuesday, sparking concerns over its sustainability.
• Bankless report suggests that “there are reasons to believe that this rally could have legs”.
• The reasons pointed out in the report include increased institutional adoption, a decline in Bitcoin’s supply, and BTC’s correlation with the equity market.
The Bitcoin rally is going strong as the world’s largest cryptocurrency by market capitalization climbed over $23,000 on Tuesday. Ever since the beginning of the year, both Bitcoin and Ethereum added 40% surges to their trajectory, retracting the entire post-FTX dump. But of course, the ongoing rally has sparked concerns over its sustainability on the backdrop of last year’s bloodbath, as well as subsequent numerous fake-out rallies.
However, the latest Bankless report suggests that “there are reasons to believe that this rally could have legs”. One of the major reasons pointed out in the report includes the increased institutional adoption of the currency, which is being fueled by the big players in the market, such as Fidelity, Grayscale, and PayPal. The report also suggests a decline in Bitcoin’s supply, which has been shrinking since mid-2019.
The report further suggests that Bitcoin’s correlation with the equity market is another key factor behind the current rally. The report states, “The surge in institutional adoption of Bitcoin has corresponded with a surge in stock market performance, indicating that institutional investors are shifting into Bitcoin as an alternative asset to balance their portfolios.”
In addition to these reasons, the report also points out that Bitcoin’s price action is being supported by the increasing interest from retail investors. This is evident from the growing number of Bitcoin accounts, as well as the increasing daily trading volumes.
All things considered, the report suggests that the rally will not zoom back to fresh all-time highs, but it could be different this time. The report concludes that, “Though the rally could eventually fizzle out, there are reasons to be optimistic about the potential for Bitcoin to reach new highs in 2021.” And with the increasing institutional adoption, a decline in Bitcoin’s supply, and BTC’s correlation with the equity market, it looks like the rally could have some legs to stand on.