2021 Outlook for Bitcoin Price and Its Risks

what is the best cryptocurrency to invest in 2021

Introduction

What Is Bitcoin?

How to Invest in Bitcoin

Bitcoin Survival 2020

How is interest in Bitcoin growing?

2021: Another Huge Year for Bitcoin Prices?

A word of caution

The Regulatory Card

Introduction

We look at the future of Bitcoin and other digital currencies, including where experts are seeing price hikes, why more people are investing, and how to get started.

Supporters of cryptocurrencies are very excited about the potential of 2021 after a huge year that saw bitcoin soaring prices dominating the spotlight.

Read Also: Things to know before investing in Bitcoin in 2021

This is nothing new - but the broader feeling on Wall Street that "it's different this time" is.

Bitcoin prices recovered from a multi-year recession in 2020. It broke the 2017 record near $ 20,000 in November and has since gone into the parabola, surpassing $ 40,000 as of this post.

However, what may make this time really different, is not that Bitcoin prices reached new highs in 2020 and ended the year with a strong head. It is that the cryptocurrency succeeded in its first test with fire.

The resilience of that digital currency and others - and the reasons behind it - have piqued many enthusiasts not only about the prospects for this newest asset class in 2021 but also the general adoption of this burgeoning financial technology. cryptocurrency

What Is Bitcoin?

First, a quick activation for beginners:

Bitcoin is one of many digital currencies. Bitcoin is mined or created by people who solve mathematical problems using computing power, in contrast to traditional fiat currencies created and operated by the government and central bank. 

Transactions are kept on the blockchain, which is an encrypted and decentralized ledger that protects Bitcoin's integrity while ensuring user privacy.

And unlike fiat currencies, which can be printed on-demand, Bitcoin is limited to a total of 21 million possible coins once fully mined. (Fortunately, it can be split in part into 1 / 100,000,000 Bitcoin, known as “Satoshi.”) And it is designed to be a true store of value that cannot be tampered with.

In fact, Bitcoin was invented in 2008 and launched in 2009, just as the world's governments have been printing money in response to the global financial crisis. A large number of other digital assets followed.

One of the things that are so impressed about how Bitcoin looked is that it came upside down. It came about through singular acceptance, sort of a grassroots thing. worldcoinindex

How to Invest in Bitcoin

Bitcoin is priced above $ 40,000 at the moment, but you can still exchange it and most other cryptocurrencies for just a few dollars by purchasing bits of currency, by buying fractions of the coins. 

But no investor should spend a penny without thinking about what is still a very modern technology and asset class.The best investment anyone can make is learning as much as they can. Really, the best way.

To that end, sites like Coinbase and Binance Academy offer rudimentary basics to keep people informed.

If you feel ready to start investing directly in the cryptocurrency itself, you can do so on a number of sites, including Coinbase and Robinhood, and even PayPal and Square's Cash app. coinbase list

Just think about starting small

Most analyst groups acknowledged at least at this point the bullish potential of Bitcoin and other digital currencies. 

However, not all of them view cryptocurrencies as a worthy investment for most retail investors only due to the still speculative nature of the space and uncertain regulatory outlook.Not to mention that despite all their gains, cryptocurrencies have rocked a lot of people at their lows. crypto folio

Bitcoin Survival 2020

Bitcoin prices have collapsed after sharp rises in 2013 and 2017, but these declines were unaffected by any major event spanning multiple asset classes.

The digital currency has only been cut by the other edge of the speculative blade; Concerns about the risks of piracy, for example, held back cryptocurrencies in 2018.

So the bear market of 2020, in a nutshell, was the first time that Bitcoin and other cryptocurrencies faced a truly global crisis threatening many types of investments.

Cryptocurrencies were not immune to the bear turn. Investors first started selling stocks in February as they switched to cash, and even safe-haven games like gold finally retreated in March. But Bitcoin eventually weakened as well, crashing hard in mid-March.

However, those declines were short-lived. Cryptocurrencies bounced stronger from the bottom, and Bitcoin turned positive by April. google binance

How is interest in Bitcoin growing?

A push of liquidity, like the one in March, is rare, and it usually occurs at the peak of a sell-off in the market. The fact that this also happened in Bitcoin around the same time indicates that there is more institutional interest in playing the game than in previous crashes.

Increased institutional interest is one of several trends that could be a major driver of Bitcoin prices over the coming years.

Coinbase, a cryptocurrency exchange expected to go public this year, on November 21, has its institutional asset base from $ 6 billion in April 2020 to $ 20 billion in mid-November. zendesk bittrex

 Here are some of the highlights from the fourth quarter of 2020:

October 27th: JPMorgan Chase (JPM) sends out its digital currency "JPM Coin" live and forms an Onyx division to focus on blockchain.

November 14th: Galaxy Digital announces its acquisition of two companies as it builds a platform for institutional access to digital assets.

November 18th: A Mexican billionaire 10% of his liquid assets are invested in bitcoin.

December 9th: Bitcoin sure has a place in investor portfolios.

December 12th: MassMutual buys $ 100 million Bitcoin.

That's just a fraction of the announcements from the fourth quarter, which also featured moves from a number of countries developing digital currency or blockchain initiatives, including the United States, Canada, Japan, England, South Korea, China, and Russia.

 Individual attention is being pushed up as platforms like Square (SQ) and PayPal (PYPL) make digital currencies like Bitcoin more accessible to people. And in October, Coinbase launched a Visa (V) cryptocurrency debit card. etoro coinbase

Then there is inflation

Cryptocurrencies like Bitcoin make comparisons with gold, as it is a relatively stable asset at a time when printing paper money is getting out of hand.

The cryptocurrency market is still in its infancy and Bitcoin is playing an active role in inflation from TIPS and gold-protected securities.

Experts and strategists at BCA Research see a similar advantage because, in addition to benefiting from an abundant global liquidity and the periodic bear market for the US dollar, Bitcoin will be an excellent way to hedge against the increase in inflation in the second half of the decade.

Time will tell if this is the case. Inflation concerns after the financial crisis drove gold prices higher in 2011, but when high inflation rates failed to emerge, investors quit the gold trade quickly. 

However, the mineral, like its digital counterpart, has hit new heights in 2020 of around $ 2,070 an ounce; In contrast to Bitcoin prices, gold has declined significantly, as it is now around $ 1,850. coinbase 50

An interesting twist on the cryptocurrency narrative this time around.

One thing we found interesting compared to 2016 and 2017 is that no one was asked about Bitcoin and its nefarious activities. We didn't get a single question about that. 

Obviously, all currencies are used for illegal activities. This question appears to have disappeared. This is an indication of growing acceptance and understanding. etoro

if i invest $100 in bitcoin today 2021

2021: Another Huge Year for Bitcoin Prices?

Bitcoin is attracting an increasing number of analysts, and as a result, Bitcoin price targets are becoming more and more popular.

In mid-November, a major money market company told its institutional clients that it saw the potential for Bitcoin prices to rise to $ 318,000 by the end of this year.

Others are more conservative. Bitcoin can hit $ 50,000 - the same target price indicated by Bloomberg in Crypto Outlook 2021.

But without making a specific prediction, the space of cryptocurrency is increasing in value in the global financial system:

It is possible that in 2021 we will find a lot of news that will push the price higher. We'll get closer to the ETF, announcements from broker-dealers that they are participating. 

Some FOMO (fear of missing out) from retail investors, and what you'll also see is that at some point you see a huge RIA announcement that they have a beneficial amount of their BTC business.

Another reservation to excluding target price, is that one of the things we think is that there is a secular trend in Bitcoin, we are in some kind of S-curve growth with an emerging technology. 

If you look at past patterns of price versus adoption, they tend to consolidate and then take multiple steps up. This is starting to look crucially higher.

This diversity is fueling the growing interest in investing in Bitcoin as an investment, as well as companies' adaptation of Bitcoin, cryptocurrency and blockchain, into a perfect price storm. etoro paypal

 

A word of caution

Investing in Bitcoin is always risky. Systemic risk, market risk ... there are some global macro events that can affect the markets, and with bitcoin financing increased, those assets will not be unrelated anymore. etoro trustpilot

The Regulatory Card

One of the biggest risks to any bullish calls, loud or not, is the possibility that regulators will suddenly build a brick wall.

While few people may ask about the use of Bitcoin to purchase illegal material anymore, regulators are taking a hard look once again at cryptocurrencies, this time focusing on how these currencies function as securities.

Noteworthy recently: In late December, the SEC filed a lawsuit against the "altcoin" ripple. (Altcoins is any digital currency that is an alternative to Bitcoin.)

 

The issue at stake is whether its digital currency is really a digital currency, or whether it is an unregistered offer of securities. 

The news was enough to cut ripple rates by more than half in just a few days, and many cryptocurrency exchanges stopped trading in the alternative currency until the problem was resolved.

Even so, some bitcoin bulls see it as a positive. Ripple has a different mechanism for the decentralized Bitcoin model, so some believe that the crackdown on cryptocurrencies is pointing to Bitcoin as the first (and perhaps only) stopping point for people interested in cryptocurrencies.

The Institute for Investment wrote in December: If you feel left out of the gains, don't do it. Bitcoin has already beaten gold and the S&P 500 over the past three years, but look at the volatile journey Bitcoin investors have had to take to get there. 

Until just two months ago, the three-year total returns were largely the same between the three assets, but the volatility is different. etoro tesla

Investing in cryptocurrencies today is a bit like living in the early days of the gold rush in the 1850s, which involved more speculation than investing.

Those who only invest through 401 (k) s, IRAs, and other accounts through traditional brokerages, cannot invest directly in cryptocurrencies through these tools yet. But you still have a few options, like investing in companies that have linked their futures contracts to cryptocurrency and/or blockchain technology.

And for most traditional investors, look at the companies on the fringes of this technology.

The SEC has yet to approve an exchange-traded fund (ETF) that tracks Bitcoin prices by holding the already cryptocurrency in the same way that SPDR Gold Shares (GLD) holds gold. However, many hope that 2021 is the year we finally see a Bitcoin ETF.

Investors can access a few ETF-esque funds. For example, the Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE), which are both trading, track the price of their cryptocurrencies. 

But they differ from ETFs in some noteworthy ways, which we explain here, which investors should know before purchasing. etoro bonus