Bitcoin caught everyone’s eye in 2020, becoming one of the best investments you could make over the last year. The cryptocurrency managed to beat its previous all-time high of 2017 and breached the $47,000 mark, becoming the most valuable cryptocurrency in the world.
Bitcoin reached a high of $47,697 on 9th February 2021. Currently, the cryptocurrency is trading at $50,000. There are several reasons why Bitcoin is going to explode in 2021, and we will take a look at a few reasons in this article.
Of course, plenty of naysayers predict doom and gloom and question Bitcoin’s rise and growing importance in the global financial system. However, there are concrete reasons behind the price boom and growth that Bitcoin is expected to see in the next few years. Let’s look at some of the reasons.
Looking Ahead: What Is The Outlook For Bitcoin In 2021?
Bitcoin started 2021 on a bullish note, and that trend seems set to continue for the cryptocurrency. Bitcoin currently trades around $50,000; with the level of interest the cryptocurrency is generating, the price is set to grow even further. Bitcoin is generating significant institutional interest, which could play a massive role in the price of Bitcoin. Significant developments like MassMutual announcing the purchase of $100 million in Bitcoin and JPMorgan Chase’s JPM coin going live are an indication of the amount of interest that Bitcoin is generating.
2021 will also see Bitcoin’s mass adoption, thanks to PayPal’s announcement that users of the platform can buy Bitcoin and make purchases using Bitcoin. This announcement gives Bitcoin access to a huge market, which could see mass adoption of the cryptocurrency, driving up the price.
Most experts agree that Bitcoin’s price could cross $100,000 by the end of 2021, and going by recent trends; Bitcoin seems to be on track to meet or even surpass those expectations.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
4 Reasons why Bitcoin is Going to Explode in 2021
#1: The COVID-19 Pandemic and Rising Inflation
A lot of people tied Bitcoin’s growth to general bullish sentiment in the world economy and that during a bear market, Bitcoin’s fall would be quick and decisive.
Well, Bitcoin has passed that test with flying colours and proved everyone wrong. When the COVID-19 pandemic hit, economies worldwide were hit hard, with economies around the world crashing. Bitcoin, too, was hit hard, and its price fell significantly. However, it is how the currency rebounded that we are more interested in.
One reason why Bitcoin is going to explode in 2021 is rising inflation. In a bid to rescue economies through stimulus packages, central banks and governments are printing more money leading to an increase in supply.
As a result, inflation will also rise. Bitcoin is immune to inflation, making it an attractive investment option for investors. Rising inflation would see investors use Bitcoin as a store of value, further increasing its price.
#2: Institutional Interest
Institutional interest has gradually been growing in Bitcoin, which is an important reason why Bitcoin is going to explode in 2021. Institutional interest in Bitcoin was already apparent in 2020 and is set to increase in 2021.
Consider this, The GrayScale Bitcoin Trust (GBTC) recently bought the entire supply of newly mined Bitcoin. Currently, they have around $4.4 billion in Bitcoin.
JPMorgan Chase’s JPM coin going live and MassMutual announcing the purchase of $100 million in Bitcoin gives you an indication of the growing institutional interest in Bitcoin. The above are just a few examples, but it is evident that institutional investors will increase interest in Bitcoin. With Bitcoin being viewed as a normal investment asset by investors, it will be opened to a significant investment flow.
Another huge reason why Bitcoin is going to explode in 2021 is Tesla’s announcement that the company invested $1.5 billion in bitcoin. The announcement saw the price of the cryptocurrency jump 14%. The investment was described as part of Tesla’s broader investment strategy of maximizing returns on cash. Tesla’s investment is another sign that Bitcoin is attracting some serious interest as an investment asset.
Mastercard and BNY Mellon have also recently disclosed their newly added support for Bitcoin.
BNY Mellon, one of the oldest banks in the US, confirmed recently that it has created a new unit for customers to hold, transfer and issue digital assets.
Mastercard, on the other hand, announced that it would soon add support for cryptocurrencies on its platform, since it will “create a lot more possibilities for shoppers and merchants.” The payments giant also noted that digital assets are becoming a more important part of the payments world.
#3: Bitcoin Halving
Bitcoin has gone through three halving events, and these have long been thought to be behind Bitcoin’s bull runs. Bitcoin’s are mined every 10 minutes, and each halving reduces that amount by, as the name suggests, half.
The reward for mining Bitcoin reduced from 50 BTC to 25 BTC in 2012, and the following year, Bitcoin’s price rallied and broke the $1000 barrier. After halving in 2016, The reward was halved to 12.5 BTC, and sure enough, Bitcoin saw another rally in 2017 when the cryptocurrency surged to $20,000.
The most recent Bitcoin halving took place on 18th May 2020, and sure enough, Bitcoin is surging. What is the reason behind the surge in price after every halving event? That can be narrowed down to simple supply and demand. With Bitcoin generating interest as an investment asset, halving events lead to a rise in price thanks to the supply of Bitcoin dwindling with every event.
This leads to a considerable amount of interest in Bitcoin, which generates enough interest thanks to it being an investment asset with unlimited potential. Halving acts as a built-in design that favours an appreciation in price, leading to a surge in the price of Bitcoin, and with the most recent halving event happening in 2020, this could be another reason why Bitcoin is going to explode in 2021.
#4: Companies Are Buying Up Bitcoin As Reserve Currency
After the halving event, we are also seeing companies buying up Bitcoin to use as a reserve currency.
A lot of companies hold a significant amount of money in reserve. Why do we see companies put some of their reserves in Bitcoin? For companies, it makes sense to shift some of their long-term reserves to Bitcoin so that it can act as a hedge against inflation.
If companies worldwide move even a fraction of their total cash reserves to Bitcoin, we could see a significant increase in the price of the cryptocurrency. With inflation rising, we are already seeing companies moving part of their reserves, with several announcements already been made from companies purchasing Bitcoin.
Mobile payments giant Square announced an investment of $50 million in Bitcoin. Stone Ridge Holdings, which manages assets worth more than $10 billion, announced that it had purchased Bitcoin worth around $114 million.
The most significant announcement was made by MicroStrategy, an asset manager listed on Nasdaq, when it announced that it had purchased Bitcoin worth $425 million, making Bitcoin the primary reserve in its reserve strategy. Companies buying Bitcoin as their reserve currency is another reason why Bitcoin is going to explode in 2021.
Read Also: 10 Bold Bitcoin Price Predictions
Why Bitcoin Is Going To Explode In 2021: Conclusion
It is amply clear that Bitcoin is going to experience significant growth over the next few years. If you consider 2021 alone, the reasons stated above are enough to understand why Bitcoin is going to explode in 2021. If you strategize and invest, you could make a significant profit.
With that in mind, investments are a tricky business, and market sentiments could positively or negatively affect the price of bitcoin. It is essential to be thorough in your research, understand your risk appetite and then invest in Bitcoin. At its current rate of growth and adoption, it won’t be surprising if Bitcoin crosses the $100,000 mark or even the $150,000 mark in 2021.
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
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