Bitcoin’s recent new all-time high of over $80,000 (at 10:37 a.m. on November 11, 2024, Bitcoin reached a new all-time high of exactly $81,858.29) has attracted worldwide attention and reignited questions about the future of cryptocurrencies and their role in the global financial landscape. The increase comes in a complex environment of inflation concerns, increasing institutional participation and new regulatory frameworks. This article analyzes the reasons for the record high and provides a comprehensive overview of the potential economic implications and the role of Bitcoin in international financial markets.
The Price Increase to over $80,000 and the Importance of Inflation
Bitcoin has reached an inflation-adjusted all-time high of $80,000, which goes beyond the mere rise in price and represents a real increase in purchasing power. Since Bitcoin’s last all-time high a few years ago, the official inflation rate has risen by 13.5 percent, which means that the actual purchasing power of today’s price has grown significantly compared to previous highs. After calculating this inflation adjustment, the current Bitcoin value is thus 16 percent above the last all-time high, which was around $69,000.
Bitcoin at ATH (Source: Tradingview)
Inflation, particularly in the US and Europe, has increased sharply in recent years, prompting many investors to look for alternatives to the traditional monetary system. Bitcoin’s inflation-adjusted highs illustrate its ability to retain value over the long term, as this cryptocurrency, with its fixed supply of 21 million units, is less susceptible to the expansion of the money supply by central banks.
The Influence of ETFs and Exchanges on Price Performance
A significant driver of the price increase is exchange-traded funds (ETFs), particularly in the US. These enable investors to acquire shares in Bitcoin via regulated exchanges without having to own Bitcoin directly. This development has particularly attracted institutional investors, who can invest securely and in a regulated manner through ETFs. In January, the first sports ETFs on Bitcoin were approved in the US, which led to a significant inflow of capital and stabilized the price.https://www.theblock.co/data/crypto-markets/bitcoin-etf/spot-bitcoin-etf-flows/embed
It is particularly noteworthy that the current record was reached over the weekend – a period when exchanges are closed and many traditional trading platforms are not active. This suggests that, in addition to institutional investors using ETFs, there is also high demand in the markets from retail investors who continue to invest heavily in Bitcoin. This is reflected in increased search queries on Google and in a rise in clicks for Bitcoin-related content.
Opportunities for Long-term Value Appreciation through Tax Advantages
In some countries, including Germany, Bitcoin is subject to special tax rules that reward long-term holding. If Bitcoin is held for more than a year, the profits from a sale are tax-free in Germany. The significance of this regulation is particularly important in the case of large price increases, as is currently the case with 80,000 dollars per Bitcoin. However, investors who purchase Bitcoin through platforms that do not allow withdrawal to personal wallets may have difficulty meeting their holding period. Switching to other platforms that allow direct withdrawals often causes the holding period to start over.
Demand is growing for custodians that offer secure storage and direct withdrawal to private wallets. Such an option ensures full control over ownership and allows Bitcoin to be stored in a wallet that is independent of the platform. This option is particularly in demand among long-term investors, as it not only ensures tax advantages but also avoids potential tax liabilities when switching to other custodians.
The Involvement of Nation States and the Global Perspective
A new development is the growing interest in Bitcoin from nation states. At least one country has reportedly acquired a significant amount of Bitcoin in recent months, putting it in the top five holders worldwide. It is estimated that this state holds over 100,000 Bitcoin. Such purchases by national actors could trigger a domino effect, with other countries following suit and investing in Bitcoin to hedge their financial reserves. For small nation states, it is a way to invest in a value whose scarcity could increase price stability in the long term.
Bitcoin Exchange Reserve All Exchanges (Source: cryptoquant.com)
There are currently about 2 million Bitcoins available on exchanges worldwide. However, many of these are deposited on platforms where the owners cannot transfer them to private wallets. Thus, only a limited portion of these 2 million Bitcoin are actually available on the market. Should larger waves of demand, such as those from nation states or institutional investors, hit these small stocks, this could create a scarcity that would significantly drive up the price.
Purchasing Power and Security – Bitcoin as a Store of Value for the Future
In February 2024, it was predicted that at least one nation state would announce that it would use Bitcoin as a store of value to partially supplement the fiat currency system. The limited supply of a maximum of 21 million Bitcoins, coupled with increasing demand from both institutional and private investors, makes Bitcoin increasingly attractive to states. Should this demand continue to grow, Bitcoin could increasingly be considered as a stable alternative to fiat money.
This scarcity is not only an economic incentive, but also a security-related factor. States that recognize the value of a scarce digital currency and secure it with their own reserves are potentially better protected against the volatility of traditional currencies. Especially for economically less stable countries, Bitcoin offers an opportunity to strengthen national financial stability through an independent and inflation-resistant currency. This development could lead to a fundamental change in the global financial system in the long term.
The Long-term Perspective – Bitcoin as a Global Reserve Currency?
With increasing demand from nation states and large investors, the question arises as to whether Bitcoin could establish itself as a global reserve currency. With its fixed supply of 21 million, Bitcoin offers a scarce, transparent alternative to fiat currencies. In addition, the technical structure of the network has proven in recent years that it is robust enough to handle large market movements and high trading volumes. For investors and state actors, Bitcoin offers a hedge against the inflationary policies of central banks, which regularly devalue their currencies to deal with economic crises.
The long-term outlook suggests that Bitcoin could establish itself as a global reserve currency, particularly attractive to states looking for a stable alternative to the dollar or euro. However, the introduction of Bitcoin as a reserve currency would also significantly influence fiscal policy and the global balance of currency areas and could lead to a new structure in the international financial architecture.
The Impact of Bitcoin on the Fiat Money System
Bitcoin represents a new form of money that is characterized by scarcity, security and independence from central banks. This fundamentally distinguishes it from traditional currencies, which lose purchasing power over the long term due to their unlimited reproducibility and political control. Bitcoin’s role as a potential store of value could challenge and change existing financial systems in the long term. In a scenario in which nation states use Bitcoin as part of their reserves, demand for Bitcoin would far exceed supply. This could put fiat currencies under pressure and further boost the price of Bitcoin.
The US, as the largest economy, could be one of the first countries to use Bitcoin as a currency reserve. This would strengthen the value of the dollar by combining it with a scarce value like Bitcoin, while at the same time putting pressure on other currencies to also integrate Bitcoin as a reserve in order to compete globally. Such a scenario could lead to a cut-throat competition that would further emphasize the value and stability advantage of Bitcoin.
Relevant article: The USA and Bitcoin – A strategic move?
Conclusion – Bitcoin as the Mainstay of a Future Monetary System
The current developments around Bitcoin indicate that the cryptocurrency could play a significant role in the future financial system. With an all-time high of $80,000 and the increasing involvement of nation states, Bitcoin is being recognized by more and more players as a stable store of value and protection against inflation. Economic uncertainty in recent years has increased the demand for Bitcoin as an alternative to fiat currencies, and the limited supply of a maximum of 21 million units creates a stable incentive for investors.
Bitcoin’s role could extend beyond that of a speculative investment and usher in a fundamental change in the global monetary structure. If Bitcoin is accepted as a reserve currency or even as a global currency in the long term, it could revolutionize the way people store money and create value. The rise in prices and increasing institutional acceptance suggest that Bitcoin is on its way to becoming an indispensable pillar in the modern financial world.
Relevant article: Senator Lummis remains optimistic about a strategic US Bitcoin reserve