Cryptocurrencies have had one of the best years so far. With major virtual assets breaking price barriers all over, people who invested in them are quite happy. For instance, Bitcoin, which started the year at about $9,500 is now almost $23,000 plus at the time of this article’s writing. Although the spike is impressive, a lot of people and investors are a bit worried that there will be a repeat of what happened back in 2017.
2017 marked the first time Bitcoin ever hit the high price of $20,000 per unit. After this record high in December of that year, a lot of people sold off their crypto, causing prices to fall drastically to about $3,100. Although people and institutions are worried about the future of this cryptocurrency, there are a few reasons to highlight why this bull run isn’t the same as that of 2017. Here is how:
One of the biggest reasons many experts say that 2021’s bull run will be different is investment institutions’ involvement. Unlike 2017 where the market was filled with retail investors, next year will be dominated by the industry’s big players. For instance, major hedge fund managers and other investment vehicles are pouring money into space. Billionaire hedge fund managers such as Larry Fink and Paul Tudor Jones have made significant moves in the industry. Unlike retail investors, institutions hold on to assets for a lot longer, especially when they are valuable. In the retail sector, it’s all about making fast money, unlike in institutional funds where they hold on to an asset for longer as it continues to soar in value. This means that should prices skyrocket and reach 2017 levels of $20,000, you don’t expect to see massive sell-offs that affect prices.
Bitcoin vs. ether
The competition between BTC (Bitcoin) and ETH (Ether) was yet another driving force behind the 2017 bull run. The fever pitch for initial coin offerings (ICO) on Ethereum was part of why Bitcoin’s values got as high as they did. For instance, during the fourth quarter of 2017, Bitcoin’s returns stood at 23.9%, contrasting with ETH’s (ether) 6.9%. This means that as the fever pitch for Ethereum was running its course, Bitcoin got a chance to shine. Since the digital currency could not continue feeding off ether’s numbers, Bitcoin plummeted, causing it to lose a lot of value over a short period of time.
Regulations in crypto markets
Back in 2017, these technologies were still in their infancy, and as such, no one really knew a lot about them; apart from that, they were very profitable. As such, several companies came up with their own altcoins and gave people the chance to join in on the success from the ground level. However, these efforts were soon perverted as malicious parties saw a way of making money off unsuspecting people. Most of these company’s owners made their millions and slipped away in the dark. This year, however, we have seen many governments take measures to regulate the industry and keep participants safe. For instance, today, there are no longer ICOs anywhere since they have been established as vehicles for fraud. Additionally, most exchanges need to verify your identity before you can operate on their platforms, which is also quite the feat.
The cryptocurrency markets are also under close monitoring by federal banks all over the world. This is to ensure that people aren’t using cryptocurrency for illegal reasons. Today, publicly traded companies need to declare their intent to purchase large amounts of crypto so as not to destabilize the markets unreasonably.
Although there might be a few similarities between these two bitcoin major bull runs, it’s important to know where they diversify. Since most of the mistakes that led to the sudden slump in Bitcoin’s value in 2017 have been rectified, we can expect to see this run go on for longer and the price of Bitcoin reach new highs.