Bitcoin's Big $40K: we're breaking down possible reasons for the epic rally

Friday, January 8, 2021 by Robinhood Snacks | Disclosures

Off the (block)chain... Yesterday, bitcoin topped $40K for the first time, more than doubling in value in the span of a month. The record price pushed the total value of the cryptocurrency market above $1T (also a first) — bitcoin makes up around $700B of that, and has nearly 5X'd over the past year.

Call it institutional FOMO... Bitcoin was launched by the mysterious "Satoshi Nakamoto" in 2009. But it really took off in late 2017, when it tripled from September to December — but then fell back down to earth. That rally was mainly driven by individual retail investors (and their FOMO). This time around...

  • Big institutional investors like banks and hedge funds got the FOMO bug, too. MassMutual Life Insurance invested $100M in bitcoin just last month. But that's not all...
  • Mainstream investors have more access to bitcoin than ever, with fintechs like Robinhood (aka: us), Coinbase, Square, and now even Venmo-owner Paypal offering crypto trading. Paypal also announced plans to let users shop/pay at 26M merchants with crypto.
  • Well-known investors like Paul Tudor Jones have come out as "bitcoin believers," inspiring bit-confidence in retail and institutional investors alike.

Bitcoin's superpower = anti-inflation... While bitcoin tends to be volatile and crash-prone, some investors see it as a hedge in case the US dollar loses too much value and prices soar (aka: inflation). ICYMI: The Fed’s money printers have been blasting out dollars to inject back into the economy. More dollars = less demand for dollars = less valuable dollars = potential inflation — oh, and the national debt is at $27.7T. Meanwhile, bitcoin's supply is capped: today, about 18.5M bitcoins have been mined out of the 21M that will ever be created (by 2140). But in theory, cash can be printed endlessly, increasing the risk of inflation.