Bitcoin has had a tremendous beginning of 2021, rising above $40,000 per Bitcoin for the 1st time.
Now, with retail investors increasingly eyeing bitcoin in light of its recent gains, new research shows how bitcoin “whales” accumulated a huge number of bitcoin tokens in December, helping the bitcoin price to never-before-seen highs.
This massive bitcoin accumulation helped the bitcoin price to soar 50% through December, with the price rise accelerating in the new year. The bitcoin price has added a further 40% in the first week of 2021 alone.
Meanwhile, bitcoin’s reputation as “digital gold” has grown in recent months as governments around the world flood markets with unprecedented levels of freshly printed cash – leading to a surge of big-name investors naming bitcoin as a potential hedge against inflation.
This combination of increased investment interest in Bitcoin as an investment, as well as increased adaptation of Bitcoin, cryptocurrency and blockchain technologies by companies, points to a perfect storm for prices.
Despite these expected “bumps,” most in the bitcoin and cryptocurrency space are predicting the bitcoin price will continue to rise over the long term.
That’s nothing new – but the much wider feeling across Wall Street that “this time it’s different” is.
What Is A Bitcoin?
First, a quick overview for the unenlightened:
Bitcoin is one of many digital currencies. Unlike traditional “fiat” currencies created and operated by a government and central bank, Bitcoin is “mined,” or created by people who solve mathematical problems with computing power. Transactions are kept on the blockchain, an encrypted and decentralized ledger that protects the integrity of Bitcoin while also ensuring the privacy of the user.
And in contrast to fiat currencies, which can be printed on demand, Bitcoin is limited to a total of 21 million possible coins once it is fully mined. (Fortunately, it can be divided fractionally down to 1/100,000,000th of a Bitcoin, known as a “Satoshi.”) It was designed to be a true store of value that couldn’t be manipulated.
Indeed, Bitcoin was invented in 2008 and launched in 2009, just as world governments were printing money to respond to the global financial crisis. A slew of other digital assets followed.
Bitcoin Soars In 2020
Bitcoin values fell steadily after sharp rallies in 2013 and 2017, but these declines weren’t precipitated by any major event spanning multiple asset classes. The digital coin was merely cut by the other edge of speculation’s blade; worries about hacking risks, for instance, hampered cryptocurrencies in 2018.
So the bear market of 2020, brief as it was, marked the first time Bitcoin and other digital currencies faced a truly global crisis that threatened numerous types of investments.
Those lows were short-lived, however. Digital currencies bounced hardest off the bottom, and Bitcoin turned positive by April.
Cryptocurrencies such as Bitcoin are drawing comparisons to gold, as they’re a relatively fixed asset at a time when fiat money printing is growing out of control.
BCA Research strategists see a similar advantage, saying that “in addition to benefitting from ample global liquidity and the cyclical US dollar bear market, Bitcoin will be an attractive hedge against rising inflation in the second half of the decade.”
2021: Another Fantastic 12 Months for Bitcoin Values?
Bitcoin is attracting a growing number of market watchers, and as a result, Bitcoin price targets are becoming more commonplace.
Some have been downright bombastic. Former Adaptive Capital partner Willy Woo calls $200,000 a “conservative” estimate for year-end 2021. In mid-November, Citigroup told its institutional clients that it sees the potential for Bitcoin prices to rise as high as $318,000 by the end of this year.
The Always Present Regulatory Risk Factor
One of the biggest risks to any bullish calls, sky-high or not, is the potential for regulatory agencies to suddenly erect a brick wall.
The most noteworthy of late: In late December, the Securities and Exchange Commission SEC filed a lawsuit against the “altcoin” Ripple. (Altcoins are any digital coin that’s an alternative to Bitcoin. ) The issue at question is whether its digital currency is really a digital currency, or if it’s an unregistered securities offering. The news was enough to cut Ripple prices by more than half in just a few days, and several cryptocurrency exchanges stopped trading in the altcoin until the issue is resolved.
Even so, many Bitcoin enthusiasts project glory days ahead. Ripple has a different structure compared to Bitcoin’s decentralized design, so some people think a tightening of restrictions on altcoins alludes to Bitcoin as the 1st (and maybe only) stop for investors looking to get into cryptocurrencies.