The price of bitcoin has increased by about 300% in the past 12 months thanks to dominant adoption and institutional interest. He recovered massively, exceeding the all-time highs of $ 41,000. At the time of writing, the price was fluctuating around $ 35,000 and it will be interesting to look at traders’ reactions and price behavior for the remainder of 2021.
The bull run will likely continue
The Bitcoin bullish cycle is likely to continue, especially in the second half of 2021. One of the causes of the price increase will be widespread adoption. Currently, relatively few people accept and use Bitcoin in everyday life. However, we can see general acceptance in the coming months. For example, PayPal allows its users to buy and sell bitcoins using PayPal accounts. In addition, Square has invested $ 50 million in bitcoin. Current adoption like this could significantly increase the price of bitcoin.
Bitcoin’s liquidity is a telltale sign that more institutional bodies are at work. Likewise, throughout 2021, institutional interest is expected to drive prices for bitcoin and other cryptocurrencies.
In another sign of the dominant cryptocurrency growth expected in 2021, the main cryptocurrency exchange Coinbase is expected to become a publicly traded company this year. The stock’s institutional assets increased from $ 6 billion to a whopping $ 20 billion between April and November 2020.
Caused by the cyclical low of the U.S. dollar and global liquidity, bitcoin will benefit significantly from people protecting against inflation. Many retailers will also take action due to fear of losing (FOMO), pushing the price further. Traders who do not want to invest directly in bitcoin will trade contracts for difference (CFDs) in bitcoin through foreign exchange brokers and trading platforms.
Institutional interest
As mentioned above, in October 2020, PayPal announced that it would support buying and selling cryptocurrencies. In addition, other Wall Street institutions and giants have shown interest in the cryptocurrency. For example, JPMorgan Chase & Co. and Citibank are predicting a booming bitcoin market. According to a leaked report from Citibank, analysts refer to bitcoin as 21st century gold, predicting it could reach $ 318,000 by the end of 2021. Likewise, Will Woo, a former partner of Adaptive Capital, if referred to $ 200,000 as a conservative price.
A note to institutional clients from Tom Fitzpatrick, global head of CITIFX, was leaked on Twitter. The note showed a chart of three bitcoin bulls in the past decade. He suggested that the bitcoin rally could peak at $ 318,000 in December 2021. However, other analysts like BTIG and Bloomberg have been more conservative, predicting that the price will reach $ 50,000.
Fiat’s fiscal and monetary policy
Fiscal policy and monetary policy aimed at devaluing the currency will work in favor of the bitcoin price. Much of the demand will come from investors who fear that printing money will devalue conventional money. With fiat money growing out of control, bitcoin is seen as a fixed asset, just like gold.
In addition to weak monetary policy, the dollar may also be strongly affected by the launch of the COVID-19 vaccine. For these reasons, the demand for bitcoin can increase significantly.
Retraction can happen
Although cryptocurrency proponents are exuberant, there is a possibility that bitcoin prices will not rise above the maximum established in 2020. In fact, the price may fall backwards and remain below that mark for some time, as was the case during the 2017 rally. Some believe that the only time that bitcoin is likely to reach another significant high is in 2024, after the next cut in the mining subsidy in half.
Bitcoin’s popularity as digital gold is spreading rapidly. However, unlike gold, bitcoin is experiencing its first global crisis, caused by COVID-19, as it was born in 2009 after the financial recession of 2008. The downward rush of 2020 in the market saw investors sell stocks for cash . Even gold, considered by many to be a safer investment than bitcoin, fell in March. Bitcoin also fell sharply in mid-March, but the case for bitcoin was different. The cryptocurrency jumped from the bottom a month later, in a bullish run that continued until the end of the year.
Regulators
Regulators have been examining digital currencies for years. Some people, though only a few, are using cryptocurrencies to engage in illegal transactions, and with the rise in the value of cryptocurrencies, governments around the world will be watching the market closely. For example, a lawsuit by the United States Securities and Exchange Commission (SEC) against the altcoin Ripple project saw XRP prices drop by almost half.
Regulatory agencies could suddenly erect an obstacle to tame unscrupulous activities around bitcoin, but this regulation could not affect bitcoin’s rise significantly.
Competition from central banks and big technologies
Transactions involving different fiat currencies can take days and involve heavy fees and a global digital currency could significantly speed up this process in 2021. While bitcoin adoption is growing, cryptocurrency may face competition to solve this big technology problem. A good example is Facebook’s digital currency, and while Facebook diem is quite different from Bitcoin, it can divert bitcoin’s attention a little in 2021.
Likewise, central banks are also competing against bitcoin. As reported by Banks for International Settlements, 80% of central banks are about to develop some form of digital currency. For example, China is working towards the adoption of a digital yuan. In many critical ways, these central bank digital currencies will be very different from bitcoin.
Conclusion
In general, adapting bitcoin to trade is a perfect cause for price increases in 2021. While bitcoin price and adoption are expected to proliferate, we cannot rule out the opposite and volatility is certainly possible.
This is a guest post from Michael. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
