Bitcoin has already proven its resilience as a digital currency and has gained some popularity among organizations, large investors and the general public.
In this regard, the price of the main cryptocurrency is «doomed» to continued rapid growth — former US Treasury Secretary Lawrence Summers said in an interview with Bloomberg the day before. He shared his thoughts on Wall Street Week.
First, a little clarification. Summers is a renowned economist who previously served as Vice President for Development Economics and Chief Economist at the World Bank, Senior Treasury Officer and Director of the National Economic Council. Since the expert has a huge track record and a list of reputable positions, his words are taken seriously. Yet Lawrence has a lot of experience and understanding of what is happening in the finance industry.
What will happen to Bitcoin next?
Commenting on the possibility of Bitcoin being in a bubble, Summers noted that he does not want to predict the dynamics of cryptocurrency prices in the short term. At the same time, «some organizations» seem to be so supportive of the concept of digital assets that they are ready to stay in the industry «for a very long time.» Here is a quote from him, in which he shares the details of what is happening. The cue is from Decrypt.
I think that after Bitcoin rallied sharply and then began to fluctuate in a narrow channel after a slight pullback, everyone has more confidence about its «resilience.» I think people will invest more and more in it. And as new investors buy BTC, given the limited supply, this will drive prices up.
Here the expert is talking about two things. By a small pullback, Summers is referring to the recent correction — that is, the drawdown — of the Bitcoin price, which occurred on January 11 this year. Then BTC fell sharply from the $ 38-39 thousand line below the 32 thousand zone. Since then, the cryptocurrency has recovered, but it has not gained a foothold above 40 thousand. The current Bitcoin exchange rate today is 37 thousand, which is 2.6 percent higher than the result of a day ago.
Under the limited supply, Lawrence mentioned a fixed maximum number of bitcoins, of which there will be no more than 21 million. This feature was invented and implemented by the creator of the cryptocurrency Satoshi Nakamoto, and this number has a clear explanation. Note that the real number of coins in circulation will be much less, since many of them have been lost. According to preliminary data, we are talking about the loss of approximately 20 percent of all coins.
While interest in BTC among ordinary investors is still far from its peak, however, large investors in the form of organizations and funds have long been investing in the main cryptocurrency. Just what is the story of the analytical giant MicroStrategy, which has already managed to earn more than a billion dollars from its investment in BTC. The company has at least 70 thousand bitcoins, which were purchased at a significantly lower rate than today.
In general, we believe that there is logic in the point of view of Lawrence Summers. The maximum number of bitcoins is really limited, and due to massive losses of cryptocurrency, it will be much less. At the same time, the interest of large companies, which have free millions of dollars at their disposal, is growing. This means that if the rate of demand grows fast enough, this can have a positive effect on the value of the asset.
It is also worth noting the expert’s awareness of the structure of cryptocurrencies and the features of Bitcoin. He knows not only about the popularity of the asset among large players, but also about the limited maximum number of coins. Recall that this is not the case everywhere. For example, a Fox Business presenter recently stated that almost all bitcoins are now lost.
Be that as it may, it is impossible to predict the development of events in the future, which means that it is not worth relying on the point of view of an expert — albeit a well-known one. Before making a deal, be sure to do your own analysis and study the cryptocurrency project in detail.