What are Bitcoin’s price predictions for 2021 as its bull run continues unabated? Will Bitcoin’s price continue to rise, or will there be severe price corrections? To make an informed forecast, we must not only take an overview of the past year, but understand the difference in emerging trends.
Accelerated Bitcoin Price After Its Third Halving
2020 was the year in which Bitcoin started to fulfil the wildest expectations of its most devoted proponents. From January 1, 2020 to January 1, 2021, Bitcoin rose from $7,108 to $29,366. Furthermore, the stock market crash in March presented a rare opportunity for investors to stock up on Bitcoin at its year’s cheapest price point — just under $5k.
Bitcoin investors with such a foresight could have sold their BTC at nearly 6X its value at the year’s end. Following the March’s market crash, Bitcoin soon rallied in anticipation of its third halving in May. With it, the Bitcoin mining block reward fell from 12.5 to 6.25 BTC. From previous halvings, it is clear they spur bull runs:
- Following the first halving, on November 28, 2012, it took less than a year for Bitcoin to rise by over 90X. Specifically, from ~$10 to ~$1,180.
- Likewise, after the second halving, on July 9, 2016, Bitcoin rose from ~$600 to ~$2,800 within a year. Eventually, it peaked at almost $20,000 in December 2017.
- This high-point represented a multi-year price resistance until the last month of 2020, following the third halving on May 11, 2020.
It is still not completely clear why it took three years for the $20k barrier to be broken. However, the most likely explanation is that expanded crypto derivatives trading contributed significantly. Specifically, the infusion of CME and CBOE Bitcoin futures. These assets most certainly contributed to the Bitcoin sell-off spree from its ~$20k peak as institutional traders placed bets against the cryptocurrency.
Forces Behind Bitcoin’s All-Time High Price
Before the third halving, the March’s stock market crash foreshadowed the erosion of trust in the central financial apparatus. The Federal Reserve engaged in a series of unprecedented money supply injections.
Since February, the US M1 money supply has increased by 55%. More shockingly, approximately 35% of all USD ever created have been ‘printed’ during the period of just ten months. Just in one week between November 16 and November 23, M1 money supply increased by half a trillion dollars.
This has never happened before in monetary history. Understandably, many investors, from retail to institutional, flocked to both gold and Bitcoin as a safeguard measure against possible hyperinflation. However, even JPMorgan Chase analysts had to admit that Bitcoin is likely to surpass gold as a safe-haven asset in the upcoming decades.
This atmosphere of uncertainty spurred institutional investors into a massive Bitcoin investment frenzy:
- A business intelligence company headed by Michael Saylor, MicroStrategy, bought at least $650 million worth of BTC.
- The Guggenheim Fund filed an amendment to the SEC for the purpose of investing $500 million worth in GBTC, accounting for 10% of its net asset value.
- Massachusetts Mutual Life, one of the world’s biggest insurance companies with a $235 billion market cap and $675 billion assets under management, bought $100 million in Bitcoin via NYDIG, while also staking $5 million in the NYDIG platform.
- Stone Ridge Asset Management bought $115 million in BTC.
- Mode Global Holdings PLC, based in London, allocated 10% of its treasury cash reserve as Bitcoin.
- The world’s biggest payment processing platform, PayPal, serving 347 million users, will provide crypto trading within its payment ecosystem, including Venmo.
- PayPal’s rival Square, has already been reaping the profits from its CashApp. It generated a 72% quarter-over-quarter Bitcoin volume increase. Moreover, Square’s October $50 million BTC purchase yielded $34 million in profits just one month later.
- Mexican media billionaire, Ricardo Salinas Pliego, invested 10% of his liquid assets in Bitcoin.
- Anthony Scaramucci’s SkyBridge hedge fund invested $25 billion in BTC.
- Iran instructed its central bank to start using BTC for imports, as a way to mitigate crippling sanctions.
- The market cap of stablecoins surpassed $20 billion, which is more than the market cap of all cryptocurrencies combined in 2017.
The list goes on and on, driving Bitcoin price to break through multiple price resistance, week after week.
2020’s Predictions for 2021 and Beyond Were Mostly Bullish
Before we make a Bitcoin forecast at the start of 2021, let's’ first take a look at realistic Bitcoin predictions made over half a year ago.
Max Keiser of Heisenberg Capital, was confident that Bitcoin is inevitably heading toward $100,000 per BTC. In the short term, he predicted it would reach $28,000 before a price correction occurred.
“Somewhere, @PeterSchiff is puking his brains out right now.
$28,000 is in play before we see a pullback - and then we’re heading to 6-figures”
Excellent forecast, as Bitcoin kept oscillating between $28k and $29k at the end of December. Likewise, Citibank forecasted that BTC has no trouble reaching $120k or even $318k during 2021. In line with JPMorgan Chase, Citibank too has started framing Bitcoin as ‘digital gold’.
“Initial good resistance is met at $10,500 – $10,820. If that gives way, the next good level is $13,850, and above there, $19,511. If $19,511 was to give way, well, the chart speaks for itself.”
Tim Draper’s Bitcoin prediction was also bullish. In April, the venture capitalist doubled down on his forecast that Bitcoin is headed toward $250k by 2023. Addressing the audience at Virtual Blockchain Week, Draper summed up his reasoning thusly, referring to the Federal Reserve’s devaluation of USD.
“All of the sudden, the retailers say, “Oh, you mean I don't have to pay 2.5-4 percent to the banks every time somebody swipes a credit card?”
Other institutional heavyweights were also overly bullish. Anthony Pompliano, the founder of Morgan Creek Digital, predicted BTC would reach $100k by 2021. By the same token, Mark Yusko, the founder of Morgan Creek Capital, set Bitcoin for a $400k rise in the next couple of years. Tom Lee of Fundstrat was way off the mark, by predicting $91k to be the end of 2020.
On the bearish side of the perspective, the educational platform TradingBeast adopted a pessimistic stance, giving Bitcoin merely $8k to $9k price range by the year’s end. Likewise, Gavin Smith, the CEO of crypto analytics company Panxora, predicted BTC price drop to $7k by the end of the year.
“A short-term washout [will happen] this year before the true rally takes hold [in 2021].”
Smith explained his reasoning further.
“The markets are pulled on the one hand by the inflation hedge story driving Bitcoin higher while at the same time the global economy is suffering a massive demand shock with the potential to drive Bitcoin lower.”
What Are Bitcoin’s Price Predictions For 2021?
Taking the reasoning of all of these past predictions into account, alongside inevitable increases in the USD money supply by the Federal Reserve, one outcome is certain. The economic instability spurred institutional investors into a buying spree. This created a couple of important factors:
- Bitcoin may receive two price corrections during 2021. However, Bitcoin’s drop in price significantly is highly unlikely. For that to happen, it would require a great number of panic sales.
- Bitcoin’s conservative, inflationary nature will continue to attract sovereign currency — USD.
- The buying pressure for BTC to drop significantly in value is too high. Moreover, steep Bitcoin price drops will spur institutional investors to buy more BTC. In turn, this would create a formidable protection of Bitcoin’s value.
If we take a look at the Stock/Flow chart, Bitcoin’s previous two big price retractions are telling:
- The first one went from $1k to $900 — 10% value loss.
- The second one went from $3000 to $2200 — 27% value loss.
Stock-to-Flow (S2F) Model is a useful tool for the kind of assets gold and Bitcoin represent. It predicts the price range based on their rarity and mining rate. Incidentally, if you are wondering how many bitcoins have been mined, the figure is 18.5 million out of 21 million total.
The author of the S2F model, predicted in May the following:
“The predicted market value for Bitcoin after May 2020 halving is $1trn, which translates in a Bitcoin price of $55,000,” further adding that, “gold and silver, which are totally different markets, are in line with the bitcoin model values for SF.”
Therefore, it is almost certain we will not see such price contraction/correction since May’s halving. The buying pressure would be too high for $30k, dropping anywhere near $12k. Moreover, with the BTC price going over the T-line, it seems the S/F model didn’t take into account inflationary interventions by the Federal Reserve.
On top of that, all other indicators remain bullish. As a whole, 2020 was marked by the pandemic, which caused a cascade of events that made Bitcoin thrive. In 2021, the following narratives are already developing, mirroring 2020’s:
- No evidence of vaccines preventing infection.
- New, more viral “mutant” strain.
- Intensified economically destructive lockdowns across Europe and the US.
Accordingly, it is likely we will see an exponential rise in Bitcoin’s price. A relatively smooth rise peaking at about $50k–$55k, with possible two big price corrections. Some of these corrections may reflect world events. However, as we have seen with BTC’s decoupling from stocks, gold, and altcoins, Bitcoin has developed its own momentum outside of daily political currents.
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- Choros, J. (2020). 35% of All US Dollars in Existence Have Been Printed in the Last 10 Months. Netcoins.
- Spence, E. (2020). JPMorgan Says Gold Will Suffer for Years Because of Bitcoin. bloomberg.
- Tran, S. (2020). Bitcoin's Price Finally Showing Signs of Macro Decoupling from the Stock Market. Blockchain News.