What’s behind the Bitcoin’s supercharged rally?

Bitcoin has once again captured the spotlight as it continues its supercharged rally, reaching record highs of over $23,000. The cryptocurrency's phenomenal surge has been attributed to growing interest from institutional investors, marking a significant shift in the market dynamics. With predictions suggesting that Bitcoin could potentially test $36,000 next year, the digital asset is attracting attention from all corners of the financial world. To delve deeper into the factors driving Bitcoin's rally and its future trajectory, CNBC Africa spoke with Tone Vays, a Blockchain & Bitcoin Analyst. Vays began by acknowledging the possibility of Bitcoin facing a correction in the short term but highlighted its strong performance over the past one to two years, signaling the onset of a bull market. Emphasizing Bitcoin's long-term investment potential, Vays suggested that the current bull market could extend for several more years, making it a lucrative option for investors seeking sustained growth. The primary catalyst behind Bitcoin's recent surge, according to Vays, has been institutional investors. Contrary to expectations of financial institutions leading the charge, corporate entities have stepped up their investment in Bitcoin as a hedge against economic uncertainties stemming from government interventions in response to the COVID-19 crisis. Vays noted that many companies are turning to Bitcoin to safeguard their assets amidst a volatile economic landscape. As the conversation veered towards Bitcoin's status as a legitimate asset class, Vays underscored the need for clarity within the crypto space. Distinguishing Bitcoin from other cryptocurrencies, Vays argued that Bitcoin's unique properties, including its decentralization and scarcity, set it apart as a valuable long-term investment. While acknowledging the diversity of cryptocurrencies in the market, Vays maintained his stance on Bitcoin's superiority and urged investors to exercise caution when navigating the plethora of options available. When pressed about specific cryptocurrencies, Vays expressed skepticism towards altcoins, including Ethereum, citing their centralized nature and lack of fundamental properties that make Bitcoin a standout asset. He cautioned against investing in Bitcoin imitations such as Bitcoin Cash, labeling them as deceptive and detrimental to unsuspecting investors. Addressing the impending IPO of Coinbase, a popular cryptocurrency exchange, Vays voiced his reservations about the platform's focus on altcoins rather than Bitcoin. Despite his reservations, Vays acknowledged Coinbase's significance in providing entry points for retail investors into the crypto market. He highlighted the growing trend of seeking investment opportunities correlated with Bitcoin, citing companies like MicroStrategy as examples of entities capitalizing on Bitcoin's rising popularity. In terms of trading advice for retail investors, Vays advised against active trading due to its inherent risks, likening it to a challenging profession with low success rates. Instead, he advocated for a buy-and-hold strategy, recommending dollar-cost averaging into Bitcoin and assuming responsibility for securely storing the digital asset. Vays cautioned against the allure of trading platforms and encouraged investors to educate themselves about Bitcoin's fundamentals to become self-reliant custodians of their investments, steering clear of potential pitfalls in the volatile market. As Bitcoin's upward trajectory shows no signs of abating, the cryptocurrency remains a focal point for both institutional and retail investors, ushering in a new era of digital asset prominence in the financial landscape.