Bloomberg Foresees Bitcoin Rallying to $400K This Year

Bitcoin chalked up staggering gains in the 12 to 18 months following the previous reward halvings in November 2012 and July 2016.

“The year after a supply cut (halving) is what 2021 has in common with 2017 and 2013, along with subdued volatility,” the Bloomberg bitcoin analysts wrote, adding that the December 2017 peak represented a 50-fold rise from the average price observed in October 2015, when the 180-day volatility reached lifetime lows.

The long-term volatility gauge almost revisited the record low in September 2020, analysts noted. Bitcoin averaged roughly $11,000 that month.

Some observers fear a faster rise in bond yields could dilute the appeal of inflation hedges such as gold and bitcoin, pushing their prices lower.

However, Bloomberg analysts foresee bitcoin remaining relatively resilient in a rising yield environment.

“Rising real yields are a headwind for gold prices, but less so for bitcoin, still in its price-discovery stage,” analysts noted. “Gold is fighting a battle with bitcoin, which can earn 6%-8% in crypto savings accounts and is well on its way to becoming a global reserve asset in a digital world.”

The cryptocurrency fell by 20% in the last week of February after the U.S. 10-year Treasury yield rose to then-12-month highs above 1.5%. The yield has continued to rise since then and recently reached a 14-month high of 1.77%. The bitcoin market, meanwhile, has held firm.

According to the report, the steep discount witnessed recently in the Grayscale Bitcoin Trust (GBTC), a popular investment vehicle, is the result of increased expectations that the U.S. will eventually approve a bitcoin exchange-traded fund. GBTC is still holding its 50-day average support, which has enticed buyers in the past. (Grayscale is owned by Digital Currency Group, which also owns CoinDesk.)