Bitcoin Mania Is Back!

Bitcoin (BTC) mania is back. The pioneer of blockchain-currencies has surged back to its 2017 highs as American institutions start buying in. This currency of the future is now being legitimized by innovation-driven enterprises, driving the coin’s price up to no end.

MicroStrategy (MSTR) has given Bitcoin the corporate seal of approval with its $425B investment in August and September, an investment that has returned the company $313B in just 4 months. This is more income than the business has produced over the last 7 years of operations.

You can see below how BTC has gone parabolic since MicroStrategy began purchasing this avant-garde digital currency in August.

The Fibonacci retracement I drew from BTC’s August highs to its September lows (when MSTR started buying) seems to have created reliable support and resistance levels to watch. Current resistance sits at $19,475 with support at around $16,800, and if we can break into the 20,000s, the next target is $21,125.

Why Bitcoin?

The massive monetary expansion that the Federal Reserve employed has executives concerned about the value of their liquid capital, with future inflation expected to swell.

MicroStrategy CEO Michael Saylor made a savvy business decision when he decided to store his enterprise’s liquid capital in Bitcoin. He made this judgment call in the face of ultra-low interest rates that were poised to eat away at MicroStrategy’s cash reserve value. Jerome Powell and the Federal Reserve are printing money like there is no tomorrow and vowing to let inflation run past its 2% target to make up for the past two decades of below-target inflation.

MicroStrategy’s management team feels that gold is an antiqued store of value and that Bitcoin’s blockchain-driven cryptocurrency is the future of inflation-protected assets. This is a store of value strategy that I expect will be increasingly adapted through the roaring 20s.

Now fintech giants like Square (SQ) and PayPal (PYPL) are buying up large sums of the pioneering blockchain currency. PayPal has been purchasing nearly 70% of all newly mined ‘virgin Bitcoins’ since mid-October and is expected to have over $30MM worth of this digital asset by the end of the year. Combined Square and PayPal are purchasing more than 100% of newly issued Bitcoin as they launch their respective cryptocurrency services.

As more institutions pile into this next generation currency, the price should continue to drive higher. Below is a list of bitcoin holdings by company provided by BitcoinTreasuries.org.

Final Thoughts

Cryptocurrencies are making a comeback in 2020, with Bitcoin up 170% while its ‘little brother’ Ethereum is up over 360%. Bitcoin is teetering at its 2017 high and looks like it’s preparing to materially break into the $20,000s as the digital currency catches a big bid from institutions.

Investing in MicroStrategy is a good, hedged way to get some exposure to Bitcoin’s resurging price. Check out my recent Bull of The Day piece on MSTR for more color.

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Square, Inc. (SQ): Free Stock Analysis Report
 
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