A great year for Bitcoin
While most of us found 2020 to be a difficult and confusing year, Bitcoin enjoyed a period of strong growth throughout the year. Things started off a bit rocky when the COVID-19 pandemic caused financial markets worldwide to crash, sending Bitcoin to a 12-month low. However, by May, it had made a full recovery and continued to grow, registering a new record high price by year-end.
Coming into 2021, Bitcoin has faced some mild volatility but continues to move in an upward direction. After breaking above $30,000 in early January, it quickly reached $40,000 before running out of steam and cooling off for a period. Most recently, a renewed rally has seen the leading cryptocurrency break through the significant $50,000 mark.
What to expect in 2021?
The unexpectedly strong growth over the past few months has left many analysts wondering what we can expect to see from Bitcoin in 2021. There are several important factors to consider that are likely to affect the price, some that stem from historical movements and some with more immediate ramifications. In order to accurately assess the direction in which Bitcoin is headed, we need to investigate three core elements that define its price: public perception, institutional investment, and the underlying technology.
Public perception is one of the most critical factors driving the price of any asset. In the case of traditional company stocks, the reputation of the company can make or break public perception. In the case of Bitcoin, there is no easily definable product, service, or use case backing the asset. Digital assets like Bitcoin lack a physical product, so their value is largely derived from whether or not people believe it has value. In the past, Bitcoin has received criticism from conservative financial groups who didn’t take the time to understand the technology and couldn’t see where the value came from.
More recently, however, big names in the fintech world are realizing the incredible use cases of cryptocurrencies, helping to drive a wider understanding of their importance. Equally, government regulators have begun to act more favorably towards cryptocurrencies, helping to improve their public image. People from all walks of life are finally beginning to see cryptocurrency as an investment for the future.
When it comes to money, the average person tends to trust their bank or financial advisor more than themselves or their friends. For cryptocurrencies to find a truly lasting foothold within the global economic landscape, acceptance by established financial institutions is paramount.
Over the years, Bitcoin has enjoyed a modicum of support from some high-profile analysts like Thomas Lee of Fundstrat Global Advisors. With 25 years of equity research experience, Lee has long touted Bitcoin’s value, recently predicting even stronger performance this year than in 2020. Overall, the sentiment is high, and the vast majority of analysts see further growth for Bitcoin in the medium to long term.
Over the past few months, institutional investment into the crypto market has exploded, with major tech and finance firms like Paypal, Tesla, Greyscale, and Microstrategy all buying up massive amounts of Bitcoin. These companies have taken the time to research whether Bitcoin is a good investment, evaluating risk, and making a calculated decision – they’re not the type of firms to make speculative bets!
Those who truly understand Bitcoin usually have a basic understanding of blockchain, the underlying technology that makes cryptocurrencies entirely different from any other asset class. Blockchain is a highly secure ledger of transactions maintained by a decentralized network of computers that can be programmed to control the supply and demand of a digital asset.
Historically, Bitcoin has enjoyed strong periods of growth following a change to the network that ensures scarcity. Known as a ‘halvening,’ this hard-coded event occurs approximately every four years and halves the amount of Bitcoin that is created daily. The third and most recent halvening occurred on May 11th, 2020, putting us currently in the midst of a .
Unlike traditional currencies or assets, Bitcoin has a supply cap of 21 million units and follows a release schedule of increasing scarcity that nobody can ever tamper with. Many financial experts believe this baked-in scarcity model is what gives Bitcoin its exceptional value and long-term viability.
During times of financial uncertainty, many governments print money in large quantities to inject stimulus into the economy, resulting in rapid inflation and damage to the value of the currency. Bitcoin’s carefully controlled scarcity and immunity to oversupply make it an excellent hedge against periods of inflation, leading many analysts to .
Is cryptocurrency safe?
Despite their exceptional long-term growth and widespread acceptance by top institutions, many people remain fearful of cryptocurrencies. This is largely due to a negative image painted by conservative economists and a fear-mongering media that doesn’t understand the technology. In reality, Bitcoin is designed to make it one of the most secure monetary networks in the world.
The decentralized, transparent, and immutable nature of blockchain technology makes it near impenetrable to theft or fraud. In fact, in over 11 years, the core Bitcoin network itself has , theft, or data breach. However, when interacting with any blockchain network, there are some inherent dangers that could occur as a result of human error.
This is why the majority of users enlist the help of a third-party company when they want to buy and sell crypto. If done through a trusted third-party, there is no reason why you should have any trouble dealing in cryptocurrency. Yes, fluctuating market conditions mean you could lose money trading cryptocurrencies, but this is no different from any other asset class.
The benefits of a cryptocurrency IRA
If you’re looking to diversify your retirement portfolio into an asset with a high potential for profit, a Cryptocurrency IRA could be the ideal product for you. The traditional stock market is facing a tough time at the moment as economic uncertainty shakes confidence globally. Precious metals traditionally offer a safe hedge against this situation but historically provide only mild returns.
Diversifying a portion of your IRA into Bitcoin will expose you to the incredible potential that this new asset class has to offer. The expert advisors at can help guide you through each and every step of opening a cryptocurrency IRA. It’s a small decision that can make a big difference!