Bitcoin in 2021: How to Handle the Changing and Unpredictable World of Bitcoin

by Nicholas Pangiet     1月 22, 2021

6 読んだ分

In recent months, bitcoin values have continued to skyrocket. The cryptocurrency reached a historic high of more than $40,000 less than 30 days after first breaking the $20,000 mark. This winning streak translates into growth of nearly 450 per cent in one year.

Of course, the bitcoin bubble didn't last for long. Within 30 minutes of hitting $40,000+, the crypto's value fell back down to less than $38,000 and remains in a state of recovery. How do you make sense of all of this?

Please keep reading to learn more about bitcoin outlook and what it means for your crypto assets moving forward.

Bitcoin Outlook 2021 and Beyond

Let's start with a simple question. What's been the impetus behind the recent appreciation of bitcoin? In the bitcoin spot market, large trading volumes are pushing prices upwards to all-time highs.

Although much of the focus remains on this digital currency, it's worth noting that ethereum-based Defi values have also broken records in recent weeks. In both cases, rising crypto values have played a significant part in this.

According to financial experts, bitcoin's upward momentum has been energized by price targets from firms such as Guggenheim and JP Morgan.

These experts also believe that profit-taking will lead to intermediate price dips, but the overall movement upwards will continue. That said, if you've been watching the market, you know that bitcoin has witnessed fluctuations of 15 to 20 per cent in recent weeks.

Of course, the cryptocurrency marketplace has long been down for its volatility. This reputation is one of the principal reasons some investors remain hesitant to dip their toes in the water. Despite bitcoin's recent value meanderings, its overall strong performance makes it a compelling investment.

It would be nice to have a crystal ball to answer all of our questions regarding the bitcoin outlook for 2021. Instead of that, here's what we know about the future of this popular digital currency.

Understanding Bitcoin's Recent Prices

It's hard to believe that bitcoin was invented just 12 years ago. This new electronic payment system sits atop an internet-based computing network. No single individual, government, or company can control it.

While the concept behind cryptos such as bitcoin remains revolutionary, you must understand this currency remains in its infancy. So is its trading history. Because of this minimal track record, we must consider this asset still mostly untested.

In other words, nobody knows for sure what bitcoin will be worth in the coming years. This lack of predictability and lack of trading history can make investing in this cryptocurrency a somewhat scary prospect.

Nevertheless, unpredictability hasn't stopped many digital-asset investors from taking a risk. The same goes for Wall Street analysts. Not only are many investing in the market, but they're also making optimistic predictions about the future of the digital coin.

These include optimistic forecasts regarding future bitcoin values, ranging from $50,000 to $400,000 or more. Why the positive outlook despite recent setbacks? Let's take a closer look at a few key reasons bitcoin prices have and will continue to rally.

Big Names Continue to Rally Around Bitcoin

For starters, the demand from institutional buyers for bitcoin continues to grow. Why? Because many now perceive it as a hedge against inflation.

There's an essential reason for this. You see, bitcoin's creators only allowed 21 million bitcoins to get put into circulation.

So, unlike the Federal Reserve, which prints US dollars like they're going out of style, bitcoin retains its value. No wonder major money assets like Guggenheim Partners and Tudor Investment have announced bitcoin purchases.

You may not know that these companies have also wagered on prices based on futures contracts on the CME exchange based in Chicago. Even Morgan Stanley, arguably an old-line Wall Street firm, has weighed in on the future of bitten outlook.

Like the other firms already mentioned, Morgan Stanley has also made robust predictions about bitcoin's future. Other bullish pronouncements have also come from JP Morgan. These robust predictions are of particular importance since JP Morgan represents the largest bank in the US.

Where did JP Morgan value bitcoin? Over the long-term, the bank claims it'll hit $146,000.

The US Dollar's Recent Decline

What's another factor we must consider when it comes to bitcoin's rosy future? The US dollar's decline in foreign exchange markets.

Remember that the US Dollar Index represents a gauge of the USD's value against the other most strongly performing currencies. These include the Japanese yen and the European Union's euro. In 2020, the USD's value decreased by 6.8 per cent, and it continues to underperform in 2021.

What are the reasons for the dollar's decline? Certainly, the Federal Reserve hasn't helped anything with its frantic printing of more than $3 trillion over the past year.

This figure represents approximately three-quarters of the full amount created in the US central bank's 108-year history. Coupled with national unrest, other governments around the world likely aren't getting the most stable "vibes" from America these days.

A change of administration has further exacerbated this situation. The Democrats have made it clear they intend to spend and spend big. They have new stimulus bills in the works. These plans equate to outsized government budget deficits for many years to comes.

How will they finance this additional spending? You guessed it! By additional Fed money printing. Why does all of this matter in the context of bitcoin? Because this bitcoin is generally denominated in USD, its prices will appear to soar almost effortlessly as the dollar continues to tank.

Convenience Drives Consumer Purchases

Because of all of the attention bitcoin has received in recent months, more investors than ever before speculate on its prices. This digital currency continues to become more convenient to attain, too.

Big brand names continue to add bitcoin to the lists of currencies they transact in. These include giants like PayPal. As it stands now, approximately 20 per cent of PayPal's users have used the app to buy and sell bitcoin.

Interestingly, recent data shows a high concentration of small bitcoin purchases in the amount of $600. Why this particular figure? That's the amount Americans received during round one of the US coronavirus emergency aid package's stimulus checks.

In other words, the stimulus plan already enacted likely contributed to some of bitcoin's most impressive and recent rallies. This observation also begs the question, "Will bitcoin prices crash again?" While you'd need the crystal ball we mentioned earlier to know for sure, that's certainly a possibility.

After all, bitcoin's price remains infamously capricious. Unexpected and substantial price swings remain common. Apart from inventing the time machine, an investor's best bet remains knowing what experts have to say about the bitcoin outlook 2021.

Experts on the Bitcoin Market Outlook

What do the experts have to say about all of this? As you might imagine, their opinions vary.

For example, Joe DiPasquale, the CEO of BitBull Capital, reminds consumers of bitcoin's extreme volatility. DiPasquale notes that prices have tumbled by as much as $7,000 in recent weeks.

Gavin Smith, CEO of Pandora, points out that there hasn't been one year since 2013 that bitcoin's price highs haven't been followed by drops of 25 per cent or more.

Although he wouldn't be surprised if bitcoin hit $70,000 or $80,000 in value, he argues that it would be foolhardy not to recognize the inherent risks of investing. Nevertheless, his overall predictions are bullish when it comes to this digital currency giant.

Others like Mike Venuto of Amplify Transformational Data Sharing also point out this one-step forward, two-steps back pattern. Venuto predicts rising prices of two to three times the current rate. But he also feels prices will eventually come back down to where they've started.

For investors with a high tolerance for risk and volatility, bitcoin may represent an excellent investment. Of course, part of this will depend on your talent for knowing when to liquidate and collect your earnings.

Get Educated, Get Wealthy

When it comes to the bitcoin outlook for 2021, there's much to be impressed by. Big-name brands are now rallying behind this digital currency, and many have bullish predictions for the immediate future. That said, investing in this crypto isn't for the faint of heart.

Because of its highly volatile nature, you'll also need to keep contestant tabs on where it's at price-wise. That way, you can get out quickly when prices start to plummet. Of course, the best investors won't wait for values to drop.

Instead, they'll sell when the market's high and reap the rewards. Would you like to find out more about trading and investments? We've got you covered.

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