Bitcoin Bets Merited in 2021 Because Crypto Is Here to Stay

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There’s no debate. Bitcoin was one 2020’s best-performing assets. The world’s largest digital currency by market capitalization, BTC labored just around $7,000 at the start of the year. By New Year’s Eve, it had more than quadrupled to trade above $29,000.

Smartphone with Bitcoin chart on-screen among piles of Bitcoins
Source: Shutterstock

On the final trading day of 2020, BTC’s market capitalization was nearly $543 billion. Putting that figure into context, if the cryptocurrency was a freestanding company, it’d be the ninth-largest in the S&P 500, just behind Warren Buffet’s Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B). In other words, bitcoin is worth more than two Coca-Cola’s (NYSE:KO).

Any security – digital or otherwise – that more than quadruples inside of a year is sure to spark concern among investors about the asset’s ability to keep moving higher. That’s particularly true of bitcoin for multiple reasons, not the least of which are its history of deep pullbacks and lingering questions regarding exactly how to value it.

However, many of the factors that boosted bitcoin in 2020 remain in place as 2021 starts, including rampant debasement of fiat currencies by global central banks, the allure of alternative assets and ongoing disruption of traditional financial services.

Bright 2021 Outlook for BTC

Put a phrase like “bitcoin forecast” into your preferred search engine and you’ll find projections that are, quite literally, all over the place. It’s nearly as easy to find naysayers claiming BTC is worthless as it is to find bulls with estimates ranging anywhere from $100,000 or $150,000 to $400,000 or $500,000.

For the most audacious forecasts, “wait and see” is perhaps the best course of action, but shorting bitcoin here and waiting for it to go $0 is a fool’s errand. Actually, it’s rather dangerous because factors are at play that drive the BTC price higher. Fundstrat digital lead strategist David Gilder noted:

Conditions are in place for a continued rally in cryptocurrency prices over the course of the next year. We remain bullish and are raising our Bitcoin price target from $25,000 to $40,000, while again noting that we recommend investors seeking to add exposure should favor pull backs given the recent run and corresponding higher valuations.

Latecomers to the world of digital currency investing can take heart in adoption rates. Bitcoin debuted in 2009 and took about a decade to reach 10% adoption in the U.S. However, some market observers believe that figure will vault to 90% by 2030.

What’s interesting about the adoption conversation is that some bitcoin bulls believe the cryptocurrency could reach $300,000 in five years without significant institutional adoption. However, institutional adoption is already happening.

For example, MassMutual recently bought $100 million of the digital coin and Guggenheim Chief Investment Officer Scott Minerd is allocating to bitcoin. Standard Chartered is launching a bitcoin custody service to service institutional clients this year. There’s chatter so many big professionals have entered the market that just 22% of supply remains for short-term traders.

Wildcard for 2021

As noted above, bitcoin doesn’t lack for 2021 catalysts. Increasing institutional adoption and flimsy traditional currencies are seeing to that, but there is a potential wildcard waiting in the wings: A long-awaited bitcoin ETF.

This is a concept the Securities and Exchange Commission (SEC) consistently rejects, but there’s a widely held belief that 2021 could be different and some issuers are preparing for that to be the case.

The Block Research’s 2021 Digital Asset Outlook confirms more than half of those surveyed believe this will be the year a bitcoin is born. If that happens, prices will almost certainly rise because it mean more institutional investors coming to market, removing supply to back these new funds. It could be a regulatory longshot, but it is an issue for BTC investors stay abreast of this year.

On the date of publication, Todd Shriber did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Todd Shriber has been an InvestorPlace contributor since 2014.

Todd Shriber has been an InvestorPlace contributor since 2014.


Article printed from InvestorPlace Media, https://investorplace.com/2021/01/bitcoin-more-than-quadrupled-in-2020-and-more-upside-is-coming/.

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