- With indisputable evidence making a case for Bitcoin upside, some critics maintain that it is a bubble.
- A simultaneous spike of on-chain indicators reveals a recurrence of 2017 mania as Bitcoin price flirts with $23,000.
Despite the compelling fundamentals and statistics suggesting that Bitcoin price is yet to experience astronomical growth, some critics maintain their stance that it is a bubble. However, on-chain data shows that demand for the flagship cryptocurrency outweighs its supply.
Bitcoin fundamentals strengthen despite critics
Chief Economist and Founder of Rosenberg Research, David Rosenberg, recently expressed his opinion on Bitcoin, saying that it was a bubble waiting to burst. According to him, it is a classic case of "follow the herd" type of trade, adding that he didn't think the government had to do anything as the market was bound to implode on its own after escalating to extreme levels.
"There's really nothing in the protocol to suggest the supply of Bitcoin can't go up once we hit that limit. We know the supply curve of gold with certainty, we don't know the future supply curve of Bitcoin, people think they know, but they don't really know. So I would just say that it's a massive bubble, and it's extremely difficult to value what bitcoin should be worth,” said Rosenberg.
His remarks reflect the position of some significant players in the economy who are yet to grasp the inherent potentials in this nascent technology. Contrary to his belief, gold could be mined, adding to its total supply, whereas Bitcoin has a finite amount of 21 million BTC that would ever exist, thereby making it a better store of value.
Meanwhile, Blackrock's Chief Investment Officer, Rick Rieder, shared a contrasting view in another interview. With over $7.4 trillion worth of assets under management, the firm is the world's largest fund manager. Reider pointed to the scarcity in Bitcoin supply as one of its major selling points, adding that it strikes him as something that will become part of investors' asset suit for a long time.
"I think putting a number in Bitcoin as a valuation is hard, but there is a demand that outstrips supply. I think there is clearly greater demand than supply,” affirmed Rieder.
Concerns have also been on the rise regarding the outcome of the meeting held by Federal Reserve officials as they have concluded that they would not be tapering anytime soon. This decision is concerning for investors because quantitative easing dilutes the value of money in circulation, making it a catalyst for inflation. The development may lead to another surge in the institutional companies that could turn to Bitcoin as a haven, causing prices to go even higher in the coming months.
On-chain data adds credence to Bitcoin's bullish outlook. Historically, the peak of three different metrics has coincided with BTC's previous all-time high. Trading volume, social volume, and daily active addresses experienced a simultaneous surge during the 2017 bull run.
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Bitcoin Daily Active Addresses, On-Chain Volume, and Social Volume by Santiment
These parameters are currently gaining momentum akin to the last parabolic Bitcoin price upswing even though its former levels have been surpassed. Breaking the $20,000 psychological resistance level marked a hypothetical beginning of the new bull cycle. This thesis creates the possibility of seeing new highs that would dwarf the previous records.
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