Bitcoin (CCC:BTC-USD) and other cryptocurrencies sold off after reports of the Biden Administrations’ plans to double capital gains taxes. Crypto investors witnessed a 20% drop in value within a few days. BTC fell below the $50,000 mark for the first time since March. Some of these losses have been recovered since then. However, it does present an excellent opportunity to invest in the world’s most popular cryptocurrency.
Bitcoin is the best performing asset class of the past decade. Moreover, with its incredible performance in the past year, many experts believe that it could be the next decade’s story. BTC climbed an incredible 550% in the past year and effectively went mainstream in investing circles for the first time.
The crypto world has come of age in the past year, and the most popular and valuable crypto is Bitcoin.
Given its meteoric rise, you would suspect the upside for BTC is probably limited at this point. However, many analysts believe that BTC will continue to rise at a healthy pace, which is an opinion that appears compelling at this point.
Major Drivers
Bitcoin has been nothing short of extraordinary in the past year and has essentially cemented its position as a viable store of value. A large part of its ascension was due to the dramatic increase in the money supply from central banks in the past year. This was naturally required to finance the massive costs in fighting the pandemic for various governments.
Another element that has heavily impacted the price of Bitcoin relates to the compression of foreign exchange volatility from central banks. Although central banks cannot directly influence exchange rates, quantitative easing programs have had a strong effect on various currencies.
With all these developments, institutional investors turned their attention to cryptocurrencies for the first time last year. In an attempt to avoid macroeconomic turbulence, they reevaluated their positions on Bitcoin and strengthened its trading infrastructure.
Later, payment platforms and other financial institutions joined in to further normalize cryptos as viable financial instruments. Hence, the 2020 turnaround is significantly different from price rises in yesteryears.
How Far Can It Go?
BTC has continued to prove its naysayers wrong and broken fresh ground several times this year. Its price has doubled from roughly $30,000 to almost $65,000 earlier this month. Though volatility remains high, several experts believe that it will continue its rally this year.
An expert panel has recently predicted that Bitcoin could exceed $100,000 in value in 2021. Moreover, the majority of panelists believe that institutional investors are driving up prices. However, they also feel that a $100,000 barrier would high for even the most powerful of investors. In the next few years, the panel of crypto experts and academics believes Bitcoin’s price could rise to a staggering $360,000 by 2025. A minority of panelists believes that it could hit $1 million by 2025.
CEO of Pantera Capital Dan Morehead recently stated that he believes that Bitcoin will grow 213% and rise to $200,000. He believes his prediction is well-backed by the upward shift in the demand curve for the asset. Moreover, he also stated that firms such as PayPal (NASDAQ:PYPL) and Morgan Stanley (NYSE:MS) would continue to push its price higher this year.
The Bottom Line on Bitcoin
Bitcoins resurgence has shaken up the financial world last year and doesn’t seem to be slowing down any time soon. Barring a few short-term hiccups, its price has moved in an upward trajectory for the year or so now. Credible analyses point to a handsome gain in its price for the foreseeable future. Therefore, the recent dips provide an excellent opportunity to start investing in crypto.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
