[Insight] Forecasting for Bitcoin in 2021
Bitcoin that had started from USD 7,200 in January 2020 showed a sharp increase rate, recording around 4 times of increase in the year alone. This was an enormous earnings rate that surpasses the NASDAQ’s yearly earnings rate (42%) by 7 times.
Bitcoin showed a steady increase at the start of 2021, recording USD 30,000. Especially, since there was a price rise for risky assets every January, due to the expectations for the new year, which is the so-called ‘January Effect,’ the anticipations for the further rise of Bitcoin’s price is growing.
It seems the optimistic views that forecasting the further increase is possible in mid-to-long terms are dominant until now. However, since the increase rate of the last year was so steep, many are raising voices saying that they should prepare for some adjustments.
Fundstrat, the first research provider for digital assets on Wall Street, also level the New year’s target price of Bitcoin up, forecasting the possibility of further price rise is high. However, since there can be adjustments some times later, they advise that it would be wise to wait for the adjustment rather than purchasing Bitcoin now.
David Grider, the Lead Digital Asset Strategist of Fundstrat, said, “Unlike the past, the institutional investors and companies are increasing their purchasing amount, providing positive momentums for the Bitcoin’s price rise.” He also forecasted, “Recently, the U.S. government introduced further economic stimulus package. If this brings the individual investors’ demands back into the market, the price may rise up to USD 40,000 in 6 to 12 months.” This is a much higher target price of USD 25,000 that was forecasted before.
He added, “It seems the hospitable conditions will continue this year,” and also advised, “But, since the price has risen too much already, if there are investors planning for Bitcoin purchase, they should wait for the adjustment and try to purchase them at a lower price.” Grider also predicted, “The possibility of regulation by the U.S. government may cause some negative impact on market psychology, but it won’t give negative impacts on Bitcoin in the long-run.”
Mark Newton, the Founder and CEO of a financial advisor firm of Wall Street, Newton Advisors, also showed his optimistic view by saying, “Though there will be adjustments for Bitcoin at the start of the new year, it will provide an opportunity for purchasing at a lower price.”
Newton forecasted, “According to the analysis based on charts, the Bitcoin’s increase rate may pause in the next year,” and added, “Since it had recorded the highest record, it may seem Bitcoin is keeping a bull market in a mid-term. However, in a short-term, it will reach its peak at the start of January, and the current increase cycle will be daunted.” However, he also said, “If the current upward trend is daunted and its price goes low, that means there will be opportunities for the investors to purchase Bitcoin at a cheaper price,” advising that investors should wait for the adjustment and resist the temptation of Fear of Missing out (FOMO).
Then why are they expecting that Bitcoin’s price will continue it’s rising? The reason is the same as the favorable factors that had driven Bitcoin’s price flow last year. The most important factor is that the continuous quantitative easing by the monetary and financial authorities of advanced countries are weakening the USD’s position.
As a well-known fact, though many of the countries started their vaccination for COVID-19, it’s still slow in supply, and side effects continue to appear. It is said that the herd immunity for the COVID-19 will appear at least in the second half of the year, not only for Korea but also for the U.S. or the U.K. Until then, the central banks will keep their quantitative easing under a loose monetary policy. And the central governments will continue to spend the national treasury with aggressive money spending. The increased liquidity due to this factor will spread into every corner of the monetary market. And it is expected that Bitcoin’s price will show a further increase in this course.
Furthermore, the increased amount of money in the market will cause a devaluation. That means the USD will become much easier to find, thus resulting in its devaluation. In this case, companies or institutional investors that understand holding cash such as USD is not so beneficial will transfer their cash into Bitcoin. And of course, they have shown such courses of action since the second half of the last year.
Also, as the same risky assets, Bitcoin and the New York stock market were in a close relationship with each other since last year. It seems the stock market will be fine in the upcoming new year, this will boosts the upward trend of Bitcoin further.
Though, even if Bitcoin seems promising, the importance of Bitcoin in the traditional capital market is so insignificant. Those who are holding Bitcoin will be less than a million in this entire world. And this is far less than a thousandth compared to a billion investors who are investing in stocks or funds. If the situation in the stock market deteriorates, the investor sentiment will become weaker, causing negative impacts on Bitcoin.
In this year of 2021, Bitcoin will try its best to expand its influence in order to become one of the major investment assets. However, it is still uncertain how stable the digital assets, including Bitcoin, will show against the regulations by each financial authority. Due to this factor, it is highly possible for Bitcoin to remain within the frame of the macroscopic liquidity environment and investor sentiment for USD and risky assets. Since Bitcoin retains high expectations, it is also a time to remain vigilant.
*This research and analysis document has been prepared for the purpose of providing information that can be used as a reference based on our reliable data and information but we cannot guarantee its accuracy or completeness.
*The document has reflected the individual’s opinion and it may not be consistent with the company’s official point of view.
