What is the future of Bitcoins, and how can I invest in it in 2021?

The bitcoin price has surged about 300 percent over the last 12 months thanks to mainstream adoption and institutional interest. It has rallied massively to surpassing all-time highs of $41,000. At the time of this writing, the price is hovering around $35,000 and it will be interesting to watch traders’ reactions and price behavior for the rest of 2021.

The Bull Run Will Likely Continue

Bitcoin’s bull cycle will likely continue, especially in the second half of 2021. One of the causes of price increase will be widespread adoption. Currently, relatively few people accept and use Bitcoin in everyday life. However, we could see mainstream acceptance in the coming months. For instance, PayPal has allowed its users to buy and sell bitcoin using PayPal accounts. Also, Square invested $50 million in bitcoin. Ongoing mainstream adoption like this could boost bitcoin’s price significantly.

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The liquidity in bitcoin has been a telltale sign that more institutional bodies are at play. Similarly, throughout 2021 the institutional interest is expected to drive the prices of bitcoin and other cryptocurrencies.

Institutional Interest

As mentioned above, in October 2020, PayPal announced that it would support buying and selling cryptocurrency. Also, other Institutions and Wall Street giants have shown interest in cryptocurrency. For instance, JPMorgan Chase & Co. and Citibank are predicting a bullish bitcoin market. According to a leaked report from Citibank, the analysts refer to bitcoin as 21st century gold predicting that it could hit $318,000 by the end of 2021. Likewise, Will Woo, a former partner at Adaptive Capital, has referred to $200,000 as a conservative price.

Fiat Fiscal And Monetary Policies

Fiscal policy and monetary policies aiming to devalue currency will work in favor of the bitcoin price. Much of the demand will come from investors who fear that the money printing will devalue conventional money. With fiat money growing out of control, bitcoin is seen as a fixed asset, just like gold.

Besides a weak monetary policy, the dollar could also be affected massively by the COVID-19 vaccine rollout. For these reasons, the demand for bitcoin might increase significantly.

Pullback Could Happen

While cryptocurrency proponents are exuberant, there is a possibility that bitcoin prices won’t rise beyond the all-time high set in 2020. In fact, the price may fall back and remain below this mark for some time, as was the case during the 2017 rally. Some believe that the only time bitcoin is likely to reach another significant high is in 2024, following the next mining subsidy halving.

Bitcoin’s popularity as digital gold is spreading fast. However, unlike gold, bitcoin is experiencing its first global crisis, caused by COVID-19, as it was born in 2009 following the 2008 financial recession. The 2020 bear run in the market saw investors sell equities for cash. Even gold, which is considered by many to be a safer investment than bitcoin, dipped in March. Bitcoin crashed hard in mid-March too, but the bitcoin case was different. The cryptocurrency bounced from the bottom a month later in a bull run that continued until the end of the year.

Regulators

Regulators have been scrutinizing digital currencies for years. Some people, albeit only a few, are using cryptocurrencies to engage in illegal trades and with the surging value of cryptocurrencies, governments around the world will be looking closely at the market. For instance, a lawsuit by the U.S. Securities and Exchange Commission (SEC) against altcoin project Ripple saw XRP prices fall by almost half.

Competition From Central Banks And Big Tech

Transactions involving different fiat currencies can take days and involve heavy fees and a global digital currency could significantly streamline this process in 2021. While bitcoin adoption is growing, the cryptocurrency could face competition to solve this problem from big tech. A good example is Facebook’s digital currency and, while Facebook diem is quite different from Bitcoin, it may draw some attention away from bitcoin in 2021.

Conclusion

In general, the adaptation of bitcoin in commerce is a perfect cause for price increases in 2021. While bitcoin’s price and adoption is expected to proliferate, we can’t rule out the opposite and volatility is certainly possible.