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Eyeing $20k for Bitcoin? Try $300k for what Citibank calls “21st Century Gold”

If you’re still in FOMO mode, fearing you missed on the latest Bitcoin (BTC) booming action, it may not be too late

The price of BTC has more than doubled since Bitcoin’s third block reward halving in May The cryptocurrency was among the best-performing assets in the first nine months of 2020 A senior Citibank analyst thinks bitcoin could potentially hit a high of $318,000 by December 2021

If you’re still in FOMO mode, fearing you missed on the latest Bitcoin (BTC) booming action, it may not be too late.

At least not according to your typical crypto enthusiasts who are launching wild price predictions, but none wilder than Citibank.

This multinational financial services powerhouse is not known for being so adventurous with market analysis and forecasts, especially with cryptocurrency, a foe, for all intended purposes.

Current price jump

The price of BTC has more than doubled since Bitcoin’s third block reward halving in May, rallying from $8,566 on May 11, 2020, to over $18,000 (As of publishing $18,426).

Analytics platform Glassnode Studio reported that Bitcoin mining revenue was back at pre-halving levels. Bitcoins that are currently liquid or trader-held are as low as 3.4 million.

Last November 18, Bitcoin breached the $18,000-mark, then again on Friday.

Bitcoin jumped as high as $18,483. This powerful movement was followed by a correction to $17,000, 24 hours later, a natural pullback, but indicative of the level of volatility to expect in this boom.

Bitcoin has seen high volatility in its 12-year history, including a recent low of $4,000 in March this year.

It has risen about 160% this year. BTC’s all-time high of just under $20,000 was touched at the end of 2017.

Investors are afraid of a 2019-style 30% Bitcoin price drop, but options data suggest $18.5K is not the top.

Read: Cryptos are Gen Z’s, millennials’ favorites but is the US presidency spurring a Bitcoin boom?

Why is this happening?

“It is not out of the question for the crypto to hit its all-time high of $20,000 this side of Christmas,” said Simon Peters, an analyst at investment platform eToro.

Peters said investors are using bitcoin as an inflationary hedge to combat the prospect of continued government stimulus. And it’s seizing the spotlight from gold as a hedge against inflation or a weaker dollar.

The cryptocurrency was among the best-performing assets in the first nine months of 2020, surging by more than 50%, beating gold and US equity indices. 

But more importantly, it is gaining legitimacy.

Bitcoin prices rallied by nearly half after the online payment platform PayPal in October said that it will open its network to Bitcoin and other cryptocurrencies such as Ethereum and Litecoin.

There are signs that BTC is being incorporated into the mainstream, such as this Bitcoin-only fund from Fidelity Investments.

Square, Jack Dorsey’s payment company, invested $50 million in bitcoin in October. The company has let people buy crypto through its Cash app since 2018 and Square said earlier this month that 80% of Cash’s third-quarter revenue came from bitcoin trading.

But two other factors are contributing. 

The first is the scarcity factor.

Bitcoin was created in 2009 with a cap of 21 million coins in the original bitcoin code. Currently, 18.5 million have been minted, or nearly 90% of that total.

It’s estimated that it will take 120 years to “mine” the remaining 10% of bitcoins needed to get to the 21 million limit.

The second factor is stablecoins or cryptocurrencies that are asset-backed or pegged to a fiat currency, like the dollar or the euro, making them stable, as the name indicates.   

Such coins are backed by governments or corporate groups with the US Federal Reserve exploring the possibility of issuing its own digital currency, amid reports that China is moving forward with a digital yuan, recently launching a trial of a digital currency, according to reports.

The U.K. is also pushing the idea of a central bank digital currency (CBDC), according to a statement from the Chancellor of the Exchequer Rishi Sunak.

Among major institutions, JPMorgan Chase & Co. launched an interbank payment system using their own blockchain-based technologies to create a dollar-pegged digital asset called JPM coin.

Read: Forget price volatility, Bitcoin’s credentials as a global currency rising

Recent price predictions

Bitcoin’s market capitalization recently hit a high of $337 billion, eclipsing a record of $328 billion set in December 2017, according to data from Coin Gecko.

Billionaire investor Mike Novogratz predicted that the price of bitcoin would hit $65,000 while offering advice to the “Game of Thrones” star Maisie Williams on Twitter recently who asked whether she should buy bitcoin. 

Novogratz responded by saying he expected the price to hit $20,000 before getting to $65,000 because of a “network effect” in which there are a ton of new buyers and low supply.

“So YES, buy it,” he said.

A leaked report from Wall Street giant Citibank has revealed a senior analyst thinks bitcoin could potentially hit a high of $318,000 by December 2021, calling it “21st-century gold.”

“The whole existence of bitcoin has been characterized by unthinkable rallies followed by painful corrections, the type of pattern that sustains a long term trend,” Citibank’s global head of CitiFX Technicals, Tom Fitzpatrick, wrote in the note to institutional clients that was leaked on Twitter—asking: “Are we on the cusp of another such structural development?”

This article is just laying out the facts surrounding the sudden rise of bitcoin and should not be construed as a recommendation to buy the crypto. Doing so will be entirely at your own risk.