2021: What Lies Ahead for Bitcoin
After many years firmly stuck in the bear market, December 2020 saw bitcoin once again trading very close to it’s all-time high. Many factors contributed to the recent bitcoin boom, from the shortened cycle to the impact of the COVID-19 pandemic on global currencies.
It seems that bitcoin could be set to continue on its upward trajectory, with the price reaching an all-time high.
Let’s take a look at the future of this cryptocurrency for the year ahead.
More widespread use
For the most part, bitcoin is not used in everyday life because very few retail stores and businesses use or accept bitcoin as payment. However, in 2020, prominent fintech companies adopted bitcoin (for example, PayPal began allowing users to buy and sell bitcoin), which influenced its value and gave it a symbolic stamp of approval for many businesses.
This trend looks set to continue in 2021, with whispers of at least one major American or European bank looking to enable bitcoin transactions.
A more competitive market
If there is one thing bitcoin has successfully achieved in its decade of existence, it’s that it has encouraged many big, international organizations to consider offering a globally accepted, purely digital currency.
Companies in the payment space are now well aware that there is a massive market for digital payments, with payments involving as many different currency markets as possible having the most potential.
Currently, transactions of this nature take days to be completed and usually come with exorbitant fees. These companies want to follow in bitcoin’s footsteps, as the currency demonstrates that a global digital currency can drastically streamline the process and lower associated costs and waiting periods.
Digital giants Facebook and Google are both reported to be moving forward with plans to create a globally accepted digital currency in 2021.
Central banks get in on the competition
A recent report and survey by the Bank for International Settlements indicated that a staggering 80% of the world’s central banks are currently developing some form of digital currency. If these digital currencies become available in 2021 and are more accessible and readily adopted by major retail stores and businesses, it could severely affect bitcoin demand.
President-elect Joe Biden’s Democratic administration will most likely be set to address and revise regulations around cryptocurrencies. Biden’s team will likely focus on regulation concerns for cryptocurrencies involving their high potential use for fraud. This will be a step in the right direction towards more and more entities feeling comfortable utilizing bitcoin and other cryptocurrencies for payments.
Bitcoin the new gold?
One hot topic of conversation in the bitcoin world in 2020 that doesn’t look set to go away anytime soon is whether or not bitcoin will continue stealing market share away from gold. Because more and more millennials seem to prefer cryptocurrencies as a safe asset rather than gold and other precious metals, some analysts believe that gold’s days as a store of value are numbered.
Could bitcoin hit $50,000 or even more?
Mike McGlone of Bloomberg Intelligence is predicting that bitcoin could reach $50,000 in 2021. If this happens, it will result in an overall market cap of a staggering $1 trillion.
But the promising predictions don’t stop there. Recent forecasts by top hedge fund experts state that bitcoin could rise in price to as high as $100,000 by the end of 2021. If that sounds amazing, consider that City Bank predicts that bitcoin could hit as high as $300,000 in 2022 — over 15 times its current value!
These figures might all sound too good to be true, but bitcoin has definitely been known to surprise in the past.
Will there be a market crash?
Not all the predictions are as promising as bitcoin hitting record-breaking highs. According to a recent survey by Finder.com, there is a lot of heated debate around whether the market will crash in 2021. Opinions are certainly divided, with 54% of respondents believing that bitcoin could lose more than half its value this year.
On the other side of the fence, another poll found that 58% of respondents believe that bitcoin will continue to rise in 2021, with 10% believing it could continue to climb all the way into 2024.
Less pressure to sell
When wanting to sell their bitcoin, investors usually have to first deposit on exchanges. Every time the bitcoin exchange registers a drop, it indicates low selling pressure in the market. In 2020, the bitcoin balance on exchanges fell a significant 18%, which means that bitcoin’s liquidity is on a downward trend.
This means that most bitcoin holders are not likely to sell at its current price level and selling pressure will stay low for a while yet.
The future of bitcoin is still quite uncertain
Bitcoin’s value is not tied into any real-world influences, such as fiscal or monetary policies. This makes it hard to accurately predict what could happen in 2021 and beyond.
Because of this, it is hard to recommend bitcoin as an investment. However, if the recent growth is anything to go by, and some of the more promising predictions for bitcoin in 2021 outlined above, it could be worth looking into investing in the world’s most popular cryptocurrency this year.