Why will the Bitcoin rally carry into 2021?

After a multi-year bear market, Bitcoin was again trading near its all-time high by December 2020. From the halving cycle to global monetary stimulus in response to Covid-19, many factors have contributed to the rally. This article outlines the fundamental bullish case for Bitcoin and highlights some Bitcoin price predictions for 2021 from the experts. My personal view is that 2020 had more similarities with 2016 than 2017. I expect 2021 to mark a new breakout for Bitcoin, with the price reaching a new all-time high at $50,000, following historical patterns, albeit in a more muted fashion.

Bitcoin Price Prediction 2021

Making cryptocurrency and Bitcoin predictions is extremely challenging even though Daily Forex’s Bitcoin prediction from 2020 was really very accurate.

It is fair to say that market sentiment is overwhelmingly bullish, with many Bitcoin 2021 predictions pointing to significant upside. The Winklevoss twins published their "Case for $500K Bitcoin" calling for Bitcoin to surpass gold as a store of value. Looking at Bitcoin price in the grams of gold, analysis by Charles Vollum suggests a 10x price increase would be in line with historical ranges.

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Willy Woo, a popular cryptocurrency analyst, recently published a note suggesting that his previous price of $200,000 by the end of 2021 now looks conservative. His Bitcoin forecast is based on the technical Top Cap metric.

Wall Street firms are also exceedingly bullish. Citi recently published a note on BTC suggesting it could peak at $318,000 in December 2021. They acknowledge that this Bitcoin price forecast represents a substantial rally but say that "it would only be a low to high rally of 102 times (the weakest rally so far in percentage terms) at a point where the arguments in favour of Bitcoin could well be at their most persuasive ever."

Even Bloomberg has a bullish Bitcoin prediction 2021, citing favourable macroeconomic drivers and the digital gold narrative in their forecast. The firm expects Bitcoin to set the new resistance level at $20,000 and potentially reach $35,000, assuming it follows a much less explosive path compared to 2017.

Caution Factors for Bitcoin Bulls

Before investing in Bitcoin, it is worth considering that it is still a relatively early-stage technology, subject to many risks. While a credible bear case is currently hard to find, I would like to highlight some things that could still go wrong in 2021 or beyond.

The most significant threat to Bitcoin and its quest for mass adoption is regulation. Janet Yellen, the next Treasury Secretary under Biden Administration, has a history of somewhat negative comments about Bitcoin. The recently announced STABLE Act, while unlikely to become a law, shows a fundamental misunderstanding of cryptocurrencies. It would require all stablecoin issuers to acquire a banking charter and obtain FDIC insurance, among other prohibitive regulatory proposals. To be fair, regulators cannot shut down the Bitcoin network, but they can make it hard for people to use, slowing down adoption and weighing on the price.

Another, albeit less serious concern, is any vulnerability in the Bitcoin code. A coincidental inflation mechanism, for instance, would be damaging to the digital gold narrative.

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