Bitcoin has had am extremely volatile year so far.
As of writing this article, it currently trades at around 19.380 USD.
During the midst of the Corona-crisis and national lockdown policies just getting implemented, Bitcoin traded as low as 5,000 USD.
The percentage gains form March lows are a whopping 350 percent (approximately)!
Many has already invested and yielded big profits this year from Bitcoin.
The question is; Where is bitcoin heading in 2021?
Many argue it might go even higher – much higher than current levels.
The first argument for further Bitcoin gains is related to the USD and FED.
If the FED keeps printing money (QE), it will continue to weaken the dollar. That in turn, will give Bitcoin a boost as BTC is usually nominated in USD.
A weaker dollar means you can buy more dollars from foreign currencies, which in turn will more purchasing power for Bitcoin.
If the USD weakens considerably, it can also damage the image of the dollar being the “world’s reserve currency”. That also might help increase demand for BTC as more and more people consider Bitcoin as a safe haven.
Another argument for further price increase in BTC is institutional investors buying BTC in considerable amounts.
On December 10th, the Wall Street Journal reported that the 169-year-old Insurance company – MassMutual – has purchased Bitcoin for $100 million.
If more institutional investors consider Bitcoin as a good investment alternative or wants to diversify their portfolios, we might see the demand surging in 2021.
Finally, we are seeing crypto currencies in general being more adopted by the mainstream. More and more businesses are accepting crypto currencies as a mean of payment.
More mainstream adaptation will increase the demand for Bitcoin and other crypto currencies.
Conclusion
Bitcoin has recovered and rallied after the worst of the Covid-19 crisis.
Many factors such as increased institutional buying might bring Bitcoin to new highs in 2021.
It might, however, have a small correction as the price increase during the latter part of 2020 has been quite rapid.
What is also a bit worrying is, how Bitcoin reacted to risk-off in the equity markets.
As stocks fell quite hard, so did Bitcoin.
When stocks rallied and recovered, so did Bitcoin.
It might seem that Bitcoin haven’t gotten it safe-haven status yet, and it might be correlated to some degree to the current risk appetite in global equity markets.
Before investing in crypto currencies, you should always consider the risks associated with it.
Never risk more money than you can afford to lose.
Keep in mind that the crypto market is decentralized and non-regulated, which in turn can create extreme price fluctuations.
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