There have been some fairly outlandish claims about Bitcoin over the years, with stories of crypto millionaire’s being made overnight and the potential for digital currency to replace all other forms of payment.
However, as of 2021, there’s no denying that Bitcoin is one of the fastest-growing assets on the market. Whereas it may once have been the reserve of a few tech heads and all but the most foolhardy investors, BTC is now seen as an essential addition to any forward-thinking portfolio.
With more and more platforms adopting cryptocurrency and increased attention from institutional investors, the next twelve months look to be an exciting time for cryptocurrency in general, but especially Bitcoin - which is by far the largest in terms of market cap and easily the most valuable token on the market.
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So is Bitcoin a good investment in 2021? What follows are five reasons you might want to consider adding Bitcoin BTC to your portfolio sooner rather than later.
5 Reasons Why Bitcoin Could Double Your Money In 2021:
1. Bitcoin adoption is accelerating
Crypto literacy has been increasing around the world. In the UK alone, an estimated 86% of the public is aware of tokens like Bitcoin and Ethereum. This is a far cry from the first few years of Bitcoin’s existence when cryptocurrency was viewed as something of a novelty and traditional investors were questioning its long-term viability.
Despite the economic downturn caused by COVID-19, 2020 saw a record number of Bitcoin wallets opened, as both consumer and investor interest in cryptocurrency soared. In fact, the company behind the Blockchain wallet alone reported an increase from 43 million to over 62 million wallets throughout the year.
Of course, increasing numbers of crypto wallets will be of interest to potential investors as it signals the potential for increased demand - which is, of course, a key driver in pushing up the value of any asset. This in itself could be reason enough to buy Bitcoin in 2021, but wallet numbers are just one part of the story. There is also a huge number of retail investors who hold their crypto assets with a custodian platform, such as Cash App or Coinbase.
Cash App, for example, reported that its Bitcoin revenue surged to $1.63bn, generating a gross profit of $32m in the third quarter of 2020 - which represented an impressive increase of 1,000% on the same period last year.
In addition, online payments giant PayPal helped send Bitcoin prices to new heights at the end of 2020 by lending its support to the token, along with Ether, Bitcoin Cash and Litecoin. Effectively, this opens up cryptocurrency for some 300 million registered PayPal users.
Looking ahead, PayPal’s adoption of cryptocurrency is a key factor for anyone looking to invest in Bitcoin in 2021. During the first quarter of the year, a large proportion of PayPal’s 26 million merchants are expected to begin accepting crypto as a payment method. Whilst it remains to be seen how popular this might be, it should be noted that PayPal has already upped the limit of crypto purchases from $10,000 per week to $15,000 per week due to unprecedented user demand.
The original remit of cryptocurrency was to become an alternative payment platform. It seems that the developments of the past 12 months have seen definite strides in this direction and, if this trend continues, it could lead to huge price increases across the cryptocurrency. As such, it could prove to be a smart move to invest in Bitcoin in 2021.
2. Wall Street is turning its attention to crypto
Is Bitcoin a good investment for 2021? It seems that much of the US’s biggest financial centre believes that Bitcoin is a good investment in 2021.
Tesla invested $1.5 Billion in Bitcoin and starts to accept cryptocurrency as payment, the price of Bitcoin reaches a new reccord above $44,000 after the news.
BTC was amongst the best performing asset classes of 2020, even outstripping Gold in the first half of the year - not something likely to go unnoticed by Wall Street.
One notable example is MicroStrategy, the business analytics firm. It has repeatedly sunk millions into BTC throughout the last couple of years - acquiring some 70,784 Bitcoin at the time of writing, with a combined value of around $1.13bn.
"This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash,” said MicroStrategy CEO Michael Saylor, adding that: “MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy."
MicroStrategy isn’t the only major player to invest in Bitcoin for 2021 either: the US financial services firm Square pumped $50 million into BTC at the end of last year. “We believe that Bitcoin has the potential to be a more ubiquitous currency in the future,” said Chief Financial Officer, Amrita Ahuja. “As it grows in adoption, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey.”
Square’s investment equated to around 4,709 BTC tokens and at the time of writing represented around 1% of the firm’s portfolio. In addition, the Square has previously set up an independent team solely focused on contributing to bitcoin open-source work for and also recently launched the Cryptocurrency Open Patent Alliance (COPA), a non-profit organization encouraging crypto innovation.
Insurance giant MassMutual has also put its faith in Bitcoin, unveiling a $100 million investment in the cryptocurrency at the end of 2020. According to Nikolaos Panigirtzoglou at JPMorgan, "MassMutual's Bitcoin purchases represent another milestone in the Bitcoin adoption by institutional investors. One can see the potential demand that could arise over the coming years as other insurance companies and pension funds follow MassMutual's example.”
The uptake of Bitcoin by large financial institutions is an important factor for would-be investors as it shows a high degree of confidence in what is still an emerging market. It is likely we will see more key institutions buy Bitcoin in 2021 which will only see prices increase, as well as becoming more stable.
3. Experts are predicting big things for Bitcoin in 2021
The cryptocurrency market is notoriously volatile and, in the past, predictions have varied widely in their accuracy. However, 2020 saw much more unified predictions on Bitcoin’s potential for the near future - including from some from the financial world’s most prominent voices.
One of the most notable forecasts has come from Citibank managing director Thomas Fitzpatrick, who has made the bold prediction that Bitcoin could pass $300,000 per token by December 2021. Given that BTC was worth just over $30,000 per token at the time of writing, this would represent huge growth for anyone choosing to buy Bitcoin in 2021.
Mr Fitzpatrick explained the reasons behind his prediction, saying that "a decoupling of gold from fiat currencies, the COVID-19 pandemic and the desire for central banks to pursue aggressive quantitative easing policies could lead to future explosive price growth in bitcoin."
Elsewhere, The CEO of DeVere Group, Nigel Green, commented that massive government spending during the pandemic had spurred inflation fears, which in turn led to investors "piling into safe-haven assets, in particular those not tied to any specific country, such as bitcoin and gold, as a shield against the turbulence."
DeVere Group also announced that 73% of the more than 700 of its millionaire clients who took part in the financial advisory firm's annual cryptocurrency survey said they are already invested in or planned to invest in cryptocurrencies by 2023 - an increase of 68% on last year as high net worth individuals continue to embrace crypto.
In an indication of the changing sentiment amongst mainstream financial giants, JPMorgan Chase's billionaire chairman and CEO Jamie Dimon, recently made a 180-degree U-turn on BTC. Having previously dismissed cryptocurrency as a fraud, Mr Dimon now confesses he is a “believer” in blockchain technology.
Finally, prominent crypto expert Willy Woo is extremely bullish on Bitcoin in the year ahead. “My Top Model suggesting $200,000 per bitcoin by the end of 2021 looks conservative, $300,000 is not out of the question," he tweeted. After analysing various market signals he added that Bitcoin’s trajectory is "pointing to reflexivity increasing, an amplified 2021 bullish feedback loop".
Source: Willy Woo Twitter
Naturally, these comments have collectively generated renewed interest in cryptocurrency’s potential as an asset, but expert predictions are by no means guarantees and anyone planning to buy Bitcoin in 2021 should ensure it is part of a diversified portfolio.
4. The Stock to Flow Model is Promising
Bitcoin is not subject to as much inflation and devaluation as fiat currencies. Due to the way BTC is mined, it is possible to accurately measure its stock to flow - an investing term used to quantify the scarcity of an asset, with ‘stock’ referring to the total supply in circulation and ‘flow’ describing the amount of new supply available annually.
Bitcoin’s S2F is a key reason that many analysts are advising investors to buy Bitcoin in 2021. At the time of writing, Bitcoin’s S2F was rated at 56 - roughly equivalent to that of gold. However, this was following the most recent Bitcoin halving in May 2020. When Bitcoin halves again it will increase the token’s scarcity beyond that of gold - which could well send prices soaring.
Typically, the price of BTC has peaked around 18 months after a halving, which would take us to November 2021. Whilst this is by no means guaranteed, it certainly suggests another good reason to invest in Bitcoin in 2021.
The idea that increasing scarcity will increase the value of BTC has been analysed by a trader known as PlanB. He created the Bitcoin Stock-to-Flow (S2F) model, predicting that the price of BTC could exceed $288k, assuming the model continues to hold.
There have of course been plenty of sceptics - any theoretical models are subject to unforeseen circumstances. However, PlanB isn’t the only one to have pointed out the relevance of Bitcoin’s S2F. Fidelity Investments issued a report in July 2020 also that "Bitcoin’s stock-to-flow will eclipse that of gold following the next halving (2024)."
Ultimately, this all boils down to supply and demand. It is common knowledge that the supply of Bitcoin is capped at 21 million coins - something that is effectively hard-wired into the blockchain technology. This in itself creates scarcity as the total supply - or stock - already has a finite number.
In addition to limited stock, the flow aspect of BTC is also waning. Following the third halving in May 2020, the block reward for Bitcoin miners dropped from 12.5BTC per block to 6.25BTC. This means that fewer Bitcoin tokens are being released into the ecosystem.
So what does this mean for those looking to invest in Bitcoin in 2021? It means that demand could soon outstrip supply. In fact, PayPal users alone already generate more demand for BTC than miners can keep up with. Traditionally, if there are more buyers than sellers of an asset then sellers can command a much higher price.
Ready To Invest In Bitcoin?
An often overlooked advantage of investing in cryptocurrency is simply its availability. Traditional investment can often be time-consuming, requiring specialist broker services and often dedicated bank accounts. One of the major advantages of Bitcoin is that, thanks to its decentralised nature, it is hugely accessible for everyday investors.
Retail platforms like eToro or Coinbase can be set up within moments and allow investors to buy, sell or trade cryptocurrencies themselves or various derivatives. There is no requirement to deal with any banks or institutions and the amount you choose to invest is entirely up to you.
Being able to specify your financial commitment also opens up the cryptocurrency market to every level of investor. Whereas bonds and property often have a very high entry threshold, a novice investor can start their cryptocurrency portfolio with as little as $10.
Of course, for those looking to invest in Bitcoin in 2021, the accessibility of cryptocurrency also directly impacts prices.
Nowhere is this better highlighted than with the aforementioned adoption of digital currency by PayPal. This has effectively given millions of users the ability to buy and spend crypto at the touch of a button - something which immediately sent the price of BTC soaring.
Once again, accessibility and demand are intrinsically linked - and we all know the importance of demand when it comes to asset appreciation.
Conclusion - is Bitcoin a good investment in 2021?
Acorrding to experts, Bitcoin is a very good investment in 2021. Bitcoin has been one of the best performing asset classes of 2020 and there are numerous industry experts predicting big things in 2021. Financial heavyweights like Mike Novogratz, Tom Fitzpatrick and popular crypto analyst Willy Woo are all bullish on Bitcoin - and they’ve been known to be right in the past.
So, is Bitcoin a good investment in 2021? As always, it’s difficult to predict what will happen in the cryptocurrency market, but there are plenty of indicators that the coming months could be very profitable for savvy crypto investors. The embracing of BTC by major institutional investors certainly offers a vote of confidence in the market and would suggest that BTC can be expected to continue to perform well.
Similarly, PayPal’s support for digital currency has opened up the market to millions of users, which could well see a spike in demand, which in turn could push up the value of BTC.
All things considered, choosing to buy Bitcoin in 2021 could be a very smart move, assuming it is part of a strategy that includes a diversified investment portfolio.
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Virtual currencies are highly volatile. Your capital is at risk.
Where can I buy Bitcoin?
One of the great things about choosing to buy Bitcoin in 2021 is how easy it is. The best way to start your crypto journey is by finding a reliable online broker or exchange. One of the best platforms for novice investors is eToro, as it offers plenty of resources and features a simple, innovative interface. If you’re new to the world of digital currency, it might be worth checking out our guide on how to invest in cryptocurrency.
Is it a good idea to invest in Bitcoin in 2021?
Choosing whether or not to invest in Bitcoin in 2021 will depend on your goals. Plenty of experts and key industry figures are expecting 2021 to be a big year for cryptocurrencies, so no could be a good time to consider adding BTC to your portfolio. How much you commit will depend on your appetite for risk, but CNBC finance writer, Darla Mercado, advises that investors commit 1% of their total investment capital to Bitcoin.
Should I buy Bitcoin in 2021?
Making the decision to buy Bitcoin in 2021 could prove to be very profitable - if experts’ predictions are to be believed. However, as always, moderation is key. The crypto markets are notoriously volatile and investors should only commit funds they can afford to lose.
How do I invest in Bitcoin?
Investing in Bitcoin has never been easier, thanks to the myriad brokers and exchanges on the market. If you’re new to the industry, then it’s worth checking out our guide on how to invest in Bitcoin to find the answers to a few common questions.