Bitcoin Price Predictions for 2021
Bitcoin Price Predictions for 2021
Will the Bitcoin price rise in 2021?
Bitcoin has been on a massive run ever since the second half of 2020. In December of 2020, the BTC price finally crossed the $20,000 level, a milestone that Bitcoin investors have been anticipating for years. Bitcoin continued to climb and created new all-time highs, surpassing $30,000 and $40,000 in the process. If we take a quick look at the crypto charts, we can see that the whole cryptocurrency market was also catalyzed by the Bitcoin rally.
Even though price volatility is still a very real risk when it comes to Bitcoin – recently, the BTC price dropped by over 21% in a very short period of time – there’s many reasons to still be bullish on the world’s largest cryptocurrency. In this article, we’ll be checking out some of the most important trends in Bitcoin right now and also feature some of the most interesting Bitcoin price predictions for 2021.
1. Institutions are investing in Bitcoin
While this would have seemed like a joke just a few short years ago, institutional investors are now participating in the Bitcoin market on a significant scale. Crypto asset manager Grayscale recorded $3.3 billion in inflows in Q4 2020, and 93% of the money came from institutional investors.
Investment companies like Ruffer, One River Digital Asset Management and Skybridge Capital have also made significant allocations to Bitcoin. Meanwhile, highly respected investors such as Paul Tudor Jones and Stanley Druckenmiller have publicly expressed positive views on Bitcoin.
Over time, it’s becoming much less taboo for major investors to discuss Bitcoin seriously or even allocate some of their capital to it. These institutional investors manage amounts of capital that can have an enormous effect on Bitcoin, which is still a relatively small asset class.
2. Bitcoin is gaining legitimacy as a store of value
Why are institutional investors becoming increasingly interested in Bitcoin? Investors are realizing that Bitcoin can function as a store of value due to its unique properties.
For one, Bitcoin is programmed to be scarce – there is a maximum cap on its supply set at 21 million BTC. Before this supply limit is reached, new BTC coins are entering circulation regularly. However, in contrast to fiat currencies, the issuance of BTC is completely predictable and is not affected by arbitrary policy decisions. 6.25 BTC enter circulation approximately every 10 minutes, and this amount will decrease by in 2024 with the next Bitcoin halving.
Meanwhile, central banks are printing money at an accelerated rates. Confidence in major currencies like the US dollar and the euro is decreasing due to fears of currency debasement. Thanks to the properties described above, more and more people are perceiving Bitcoin as a digital version of gold, a precious metal that has served as a safe haven for thousands of years. Bitcoin has some unique advantages compared to gold – for example, it can be transferred anywhere in the world for a relatively low cost, and it is also almost infinitely divisible. In addition, storing Bitcoin is much more efficient and cheaper than storing gold.
Over more than a decade since its launch, Bitcoin has proven itself as an extremely resilient system thanks to its decentralized design. The Bitcoin network is transferring billions of dollars of value every day, and its mining infrastructure is stronger than ever.
3. Fundamental factors
There are several fundamental metrics that also show that the Bitcoin network is enjoying growth. The number of active Bitcoin addresses has been trending upwards since March of 2020, when the Bitcoin market witnessed one of its worst price crashes in history. According to data provided by Glassnode, there’s now around 1 million active Bitcoin addresses.
The presence of wealthy investors in the Bitcoin market is also clear if we take a look at how many addresses are holding large amounts of BTC. As per data from The Block’s data dashboard, the number of Bitcoin addresses holding more than $10 million worth of Bitcoin has been climbing considerably and is at around 6,800 at the time of writing.
Taking a look at the Bitcoin hashrate chart from Blockchain.com, we can see that the Bitcoin hashrate has fully recovered from the drop caused by the third Bitcoin halving, which happened in May of 2020, and progressed to new all-time highs. The more hashrate the Bitcoin network has, the more difficult it is for any single entity to accumulate enough resources to attack the Bitcoin network.
4. Innovations like Lightning Network and Stacks are being built on top of Bitcoin
There have been many attempts to improve on Bitcoin over the years by developers who created new cryptocurrencies and blockchain-powered platforms, but none have managed to reach the same level of success as the world’s first cryptocurrency.
However, that isn’t to say that Bitcoin is perfect and can do it all. Bitcoin transactions are relatively slow when compared to other electronic payments, and even many other cryptocurrencies. During periods of high activity on the Bitcoin network, transaction fees can increase to a point where making smaller transactions doesn’t make much economic sense. In addition, Bitcoin does not support blockchain-based smart contracts, a concept pioneered by Ethereum.
The core technology of Bitcoin is unlikely to see any groundbreaking changes moving forward. Some of Bitcoin’s most appealing characteristics are its stability and resilience, which could be compromised if Satoshi Nakamoto’s original recipe is tampered with too much.
Instead of introducing flashy new features to Bitcoin, talented developers are creating layer 2 solutions that perform much of their work off-chain but still use the Bitcoin blockchain to guarantee security.
The Lightning Network has emerged as the leading project when it comes to addressing Bitcoin’s scalability woes. It allows users to open a payments channel and send extremely cheap and fast BTC between each other. When the channel is closed, the information is broadcasted to the Bitcoin blockchain.
Meanwhile, Stacks is an example of a project that’s leveraging the security of the Bitcoin blockchain for the Stacks blockchain platform, which supports smart contracts and decentralized applications.
Top 5 Bitcoin price predictions for 2021
Now that we went through the main reasons why Bitcoin is enjoying a very bullish period, let’s take a look at some of the top Bitcoin price predictions for 2021 made by notable people in the cryptocurrency community.
1. Willy Woo: $200,000 by end of 2021 is a »conservative estimate«
Willy Woo is a Bitcoin analyst who has achieved a great deal of popularity in the cryptocurrency community for analyzing the Bitcoin market in tandem with fundamental metrics sourced directly from the Bitcoin blockchain. In December of 2020, Woo said that a BTC price of $200,000 by the end of 2021 is conservative according to his Top Model. According to Woo, a price tag of $300,000 for Bitcoin by the end of this year is not out of the question.
2. Tone Vays: $100,000 is a possibility for Bitcoin
Tone Vays is one of the most prominent technical analysts for the Bitcoin market, and his analysis of the Bitcoin charts is closely followed by many traders. In December of 2020, Vays said that the recent price action has made his previous $45,000 price target for Bitcoin look very conservative.
»I am now even more bullish than I was a few months ago, and I think that my target of $45,000 is very conservative, and we are looking at something closer to $100,000.«
3. Meltem Demirors: Bitcoin at $100,000 makes perfect sense
Meltem Demirors is the chief strategy officer of cryptocurrency investment company CoinShares. She is one of the most popular members of the cryptocurrency community and frequently advocates for Bitcoin in mainstream media appearances.
In a post published in December of 2020, Demirors briefly discussed the red-hot markets for collectibles to make a point that what people consider expensive is always relative. Introducing Bitcoin into the conversation, she said that Bitcoin is the »ultimate collectible« and stated:
»Bitcoin at $100,000 isn’t crazy. It’s actually one of the most logical things I’ve ever heard.«
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