2021 bitcoin outlook
This year has been a wild ride for anyone who has invested in the bitcoin market, or even just to watch it. In December, the world's most valuable virtual currency was trading at over US $ 29,000.
When the United States began wrestling with Covid-19 in early March, Bitcoin was below $ 3,800. For owners or sellers, this is an insane source of profit and loss. For those (like me) on the fringes, it is an entertaining market spectacle, with undertones of jealousy, dizziness, rage and extreme joy.
Despite this huge fluctuation in the price of bitcoin, in a generally upward direction, 2020 has also been a year of relative maturity for a currency that, after all, has only been trading for a decade. From my corner as a financial analyst, here are what I consider to be the all-important bitcoin trends in 2021:
1. A more general acceptance
The everyday use of Bitcoin has always had a chicken egg problem: very few use or accept it because ... for one thing, very few use or accept it.
But 2020 has seen a striking evolution in bitcoin adaptation. Some top FINTECH companies, from Square's $ 50 million bitcoin investment, to PayPal for its users to buy and sell bitcoin, have given it a stamp of approval.
In 2021, we'll likely see an expansion of this acceptance by the general public. Look for at least one major US or European bank to advertise some sort of system in which they allow bitcoin purchases or agree to hold digital assets for their customers.
2. Competition from large IT companies
Whatever bitcoin has or has not accomplished in its decade of existence, it has forced many large global entities to think about offering an international digital currency.
Every business involved in the payments space understands not only that there is a market for digital payments yet to be gained, but that payments involving different currency markets have the most potential. This is because currently such transactions can take days to resolve and often involve high fees.
Bitcoin has demonstrated, even though it is embryonic, that a global digital currency can significantly streamline this process. This year, Facebook and Google, companies with massive global reach that bitcoin can only dream of, have moved forward with big digital currency plans.
Tech offerings like Facebook's Diem aren't exactly the same as Bitcoin, but if they start to gain momentum in 2021, they could eat away at Bitcoin's growth a bit.
3. Fierce competition from central banks
This year, the Bank for International Settlements (BIR) released a report and survey indicating that 80% of the world's central banks are working on some form of digital currency.
China has taken the digital currency experimentation much further than any other country. Recently, in the eastern Chinese city of Suzhou, just west of Shanghai, a lottery was held in which 100,000 residents each received 200 renminbi (about $ 30) via a digital wallet. . They were encouraged to link their digital money to their bank accounts, and if they didn't spend their digital money in a matter of weeks, it was gone; two excellent techniques to advance the experience.
As China moves toward a national adaptation of the digital yuan, it is likely to reduce demand for bitcoin and other independent cryptocurrencies. The next year may see similar experiences in other countries.
4. A new regulatory playing field
President-elect Joe Biden's administration will have higher priorities in its first 90 days than regulating cryptocurrency, and of course, the mood and expertise of Congress on the subject is hard to read.
The natural assumption is that a Democratic administration will regulate more rigorously than a Republican administration, but some have argued that Biden would be "good for cryptocurrency."
Perhaps, but bitcoin enthusiasts tend to overlook issues such as anonymity and its potential use for fraud; for regulators these are very serious concerns.
Biden's team may well find a more comprehensive and rational way to regulate cryptocurrency, but I wouldn't bet on bitcoin favoritism in particular.
5. Persistent volatility
Because the value of bitcoin is not directly tied to an obvious real-world phenomenon (such as fiscal or monetary policy), it can rise or fall in ways that are difficult to predict or even explain.
As an investment, it's hard to recommend it to anyone hoping to avoid big losses. Some say bitcoin could hit $ 50,000 next year, and while it seems extreme, it's not out of the question that investors are moving money from other assets to bitcoin.
Of course, it's just as possible that the price is heading in the opposite direction in 2021. The only thing that seems certain is that the mad rush of 2020 will repeat itself - so buckle up. Most importantly, never invest more than what you can afford to lose.
Happy new year 2021