Is Bitcoin Still a Good Investment in 2021?
While many skeptics are still saying that Bitcoin is nothing but a Ponzi scheme, “in a bubble,” and much more, financial analysts believe that the price of Bitcoin will go up in 2021, reaching as much as unprecedented $318,000.
Bitcoin reached an all-time high at the start of the year — its highest since 2017, and while the market is fluctuating again, it still seems to have strong feet and aims to run and run.
Let’s review digital currency’s performance over the past year, verify which predictions from analysts came true and which didn’t, and hopefully help you make an informed decision whether or not Bitcoin is a worthy investment in 2021.
Bitcoin stayed strong in 2020
Bitcoin experienced one of its most significant years in 2020. Bitcoin prices reached new highs last year — a stark contrast to the digital coin’s crash in 2013, where the original cryptocurrency fell from a value of US$1,200 to US$600 per coin. And let’s not forget how the pioneer cryptocurrency dropped to less than US$12,000 as 2017 came to a close.
But these dips weren’t caused by any worldwide crisis — in fact, other cryptocurrencies such as Ethereum and Litecoin also lost more than 20% in value over twenty-four hours. These declines were merely a result of speculations and worries about hacking.
2020 was the first time that a global crisis threatened these investments. At the start of the year, cryptocurrencies were not immune from the bear market. Numerous investors began selling their equities for cash. Even the value of gold, silver, and stocks fell. The price of Bitcoin, just like other digital currencies, took a major hit in March, plunging to as low as US$3,850 in a single day.
However, that decline was short-lived. Bitcoin bounced back the hardest (and quickest) — by the end of April, the digital currency had already doubled in value. From there, Bitcoin was an unstoppable force. It ended the year with a bang, surpassing the US$20,000 mark for the first time in its history. Bitcoin saw an increase by more than 300% in the past year, even if the stock market slipped because of the pandemic.
What caused Bitcoin’s rallying?
2020 saw the start of the latest Bitcoin bull run. Many crypto bulls, including Pascal Gauthier, CEO of Ledger, predict that this bull run will last longer than previous ones, and we’ve already seen the results. Bitcoin started 2021 with a new record high, reaching nearly $42,000 on the 8th of January. It did, however, plunge to $31,000 in days, which is still considerably high.
To understand how Bitcoin will perform throughout the rest of 2021, it’s essential to examine what led it here in the first place. Bitcoin’s bull run was sparked by a few key moments in 2020, such as:
- In October, PayPal announced that it would enter the cryptocurrency space. With over 300 million users worldwide, it is expected that PayPal’s cryptocurrency business will contribute approximately $600 million in revenue. This announcement quickly resulted in international interest and crypto price fluctuations.
- The fear of a global recession forced many investors to seek alternative assets such as digital currencies. Many well-known investors such as Paul Tudor Jones and Stanley Druckenmiller threw their logs into the cryptocurrency campfire, which helped persuade even skeptical investors to evaluate and enter the market.
- JP Morgan opened platforms to facilitate crypto exchanges, allowing customers to perform account-to-account payments. This may motivate other U.S. banks to accommodate cryptocurrency banking.
- Citibank Group’s senior analyst revealed that the price of Bitcoin could potentially reach more than $300,000 by the end of 2021, going as far as to call it “the new gold.”
How is Bitcoin doing so far?
We’re almost through the first month of 2021, and Bitcoin has already hit a record-high of $41,941 on January 8. Since then, Bitcoin has fallen to $35,900 at the time of writing, January 17, 2021.
It might seem like a downfall, but what happens, in reality, is that at this price, most skeptical investors and HODLers simply exit the market and dump their liquidity, being satisfied with the price and considering “enough is enough.”
While some investors are skeptical, others predict that the price of the grandfather of all cryptocurrencies could reach as high as $318,000 by December 2021, seeing that the bull market is likely to stay. Meanwhile, Chamath Palihapitiya, founder of Social Capital, said that Bitcoin is “probably going to $100,000, then $150,000, then $200,000” in five to ten years. And these numbers and timeframes could satisfy the patient investors, evaluating the usually volatile and seemingly unpredictable market of cryptocurrencies.
Should you invest in Bitcoin in 2021?
With so much hype, you may be wondering if investing in Bitcoin should be one of your New Year’s resolutions. There is no simple way to answer this, as it ultimately depends on your risk tolerance, strategies, and investment goals.
What makes the cryptocurrency different from others is its extreme volatility. It’s worth exactly as much value the traders assign to it. To put things into perspective, if you invested in Bitcoin in January 2020, you’d expect a 300% profit by December 2020. However, if you invested in January 2018 and sold your Bitcoin on December 31, 2018, you would have lost most of your money, as this was when the price of Bitcoin plummeted. The cryptocurrency market is very dynamic, making it difficult to predict the long-term digital currency price accurately. Bitcoin’s history has shown that it can spike and then come crashing down in an instant.
Before investing in Bitcoin, it would be wise to do as much research as possible. Many investors compare Cryptocurrency investing to gambling — you should only invest what you are prepared to lose.
Don’t be intimidated by Bitcoin’s $35,000+ price now, as you can still enter the market by purchasing a fraction of a Bitcoin. To illustrate, there are 100,000,000 satoshis (sats) in one Bitcoin (BTC). This means that you can still own Bitcoin even if you buy only 0.00000001 BTC. At its current value of $35,900, 1 sat would cost you only $0.000359, which we’re pretty sure you can afford.
Bitcoin belongs to high-risk investments. Since the price of digital currencies is extremely volatile, investing in Bitcoin may be ideal only for those willing to hold on to their coins. Individuals who may need to sell their cryptos at a moment’s notice may find themselves with significant losses instead of gains.
Before investing in Bitcoin, it’s best to consider expert opinions, price speculations, and market trends. Bitcoin’s bull run is still ongoing, and it is expected to continue for the entirety of the year.
Is 2021 a good time to buy Bitcoin? You know, it’s always a good time to buy Bitcoin. The actual challenge is analyzing the market and knowing when to sell Bitcoin.
Investing in Bitcoin does not mean making money overnight. The goal of crypto investments is to preserve their value. Bitcoin does not follow traditional investments — instead, it entirely depends on how much you are ready to sell it for in the future.