The year 2020 ended with an explosion in the price of Bitcoin.

It rose further with the start of the new year 2021 as Bitcoin broke through $33,000 for the first time ever on Friday and then climbed above the $34,000 level.

The perception of Bitcoin has also changed from what it was earlier.

Bitcoin has now caught the imaginations of institutional investors and gained acceptance as a future store of value.

A survey of global fund managers conducted by BofA Securities showed that bitcoin was the third most traded asset in December, beating gold bonds.

Analysts told that Bitcoin is now seen as an inflation hedge and an asset that has the potential to deliver significant returns quickly.

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Bitcoin has nearly quadrupled in value in 2020, outperforming safe-haven gold and the dollar.

For the first time, foreign research house Jefferies included bitcoin in pension fund assets, cutting the allocation of gold by 5% in favor of bitcoin.

Despite the hardening of traditional institutions in the past and their refusal to approach bitcoin in the past, billionaire investor Warren Buffett even described bitcoin as rat poison and did not see cryptocurrencies as a worthwhile asset class.

Except for the side of not getting close to Bitcoin, many institutions got rid of it and decided to invest in Bitcoin.

stated Mr. Hitash Jin, Vice President of Research at Yes Securities Ltd:

The ultra-cheap money pumped by global central banks has found its way into many digital assets, including bitcoin.

We are in a scenario where both safe havens and riskier assets converge simultaneously, which is a theoretical contradiction.

It is true that large investors and due to the weakness of the dollar are heading towards bitcoin, but bitcoin still lacks the traditional fundamentals unlike gold, as bitcoin is very volatile.

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I don’t think bitcoin can replace gold as an inflation hedge.

Some analysts in the bearish camp have drawn parallels between Bitcoin’s current rally with the 2017 rally, and argued that Bitcoin’s rally is caused by a shift in allocation from safer to riskier assets.

So there could be a deep correction.

In 2017, Bitcoin soared from a low of around $790 to a peak of $1,041 in December 2017.

Interestingly, through a survey conducted by “Bank of America” in December 2017, the results showed that Bitcoin topped the list of the most traded and crowded assets.

In 2018, the price of Bitcoin crashed 74%.

Mr. Sahil Kapoor, Senior Market Analyst at Edelweiss Securities, said:

The current rally appears to be extended and ready to fall.

The easy liquidity helped Bitcoin find an easier way up.

Another indicator flashing in red is the bitcoin-gold ratio, which has risen from 1.1 to 15 levels in recent months.

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Suganda Sachdeva, Vice President of Minerals, Energy and Currency Research at Religare Broking Ltd. said:

Since both gold and bitcoin have a limited supply, the bitcoin to gold ratio gives us an idea of ​​which one is overpriced.

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