Over the past 2 years, we have seen Bitcoin enter into a recovery phase that ended up taking it to new highs just a few weeks ago. Institutional investors and individual investors buy Bitcoin as a hedge against inflation, and the world is once again entering into a stage of “mania” when it comes to the acquisition of the popular cryptocurrency. But is this growth sustainable? Many would argue that the volatility of Bitcoin and its lack of usability limits it massively.
In this article, we explore both the positive and the negative side of Bitcoin for 2021 and discuss its potential to act as a better store of value than anything else that has been created up to this point. Let’s delve in!
Bitcoin has a bright future
Most investors have a positive outlook for the future of bitcoin. The instabilities in the global economy have led many to believe that a collapse of the US dollar is imminent, and those who manage to transfer their value in safe-haven assets are those who will win.
It is better than gold
Bitcoin is, in many ways, the best store of value. Not only is it not tied to any other financial market, but it is also a lot more beneficial than using gold. More specifically, we see the following:
- Bitcoin is easier to store and has no recurring fees, as compared to gold
- The cryptocurrency is digital, which means that it can be transferred or sent to other parties without any hassle or bureaucracy.
- Bitcoin also has a capped supply and there can never be more coins available. While we have an approximate idea of the value of gold, we can never be sure of its exact supply and issuance.
It offers a way out of inflation
The uncontrolled money-printing practices of the US government have inflated the supply of the USD by approximately 18% per year ever since the financial crisis of 2018. This is possible due to the currency’s removal from the gold standard in 1971, which allowed governments to control its issuance at will.
Naturally, this leads to a steady increase in prices over time. A house that cost $10.000 just 60 years ago is today worth more than $100.000 – and the numbers just keep on growing. This has a detrimental effect on anyone with savings in their bank account and leads to a steady decrease in the public’s value.
Bitcoin offers a way out from this issue. Not only is it impossible to print more Bitcoins than the total supply, but the currency also increases in value over time due to the ever-decreasing issuance (a.k.a. Bitcoin halvings). Due to this, instead of your savings being worth less, they end up being worth more over time, as we have seen over the past decade.
But there are some risks as well
There are also several risks we need to keep in mind when it comes to the future price of Bitcoin. While we will probably not see these affecting the growth trajectory of BTC in 2021, they will play an increasingly important role in new investment decisions in the years ahead.
Regulations are coming
The first and most important risk is that of governments fighting Bitcoin head-on, regulating it across the globe in order to limit its exposure to the public. This could be the most realistic attempt towards “taming” the popular cryptocurrency as governments continue to impose lockdown measures and weakening the US dollar.
If this would happen, chances are that it would only be temporary. After all, Bitcoin is sound money, and a ban on its use would only lead to a decrease in price and an eventual acquisition by the same governments that banned it previously. We saw the same happen temporarily with gold in 1929.
Bug in the code
Another potential risk for Bitcoin, albeit less likely to occur, is that the code is infected by a certain bug or malware. While the chances for this are slim to none, it is still a risk that you need to keep in the back of your mind, as Bitcoin is digital and there is not an actual representation of it that you can use physically. This is also one of the reasons for which gold enthusiasts are hesitant to make the transition to “digital gold”, the way Bitcoin is often referred to.
Will Bitcoin keep growing this year?
It is our assumption that this could very well be the best year for Bitcoin. Not only because of the repetitive market cycles but also because we now see institutions buying the currency up en’ masse. This could also mean that this would be the first market cycle in which large investors will front-run the next cycle, and we end up with a >$500.000 BTC.
Being in love with communications and human relations I found myself in Journalism. Another passion of mine is the crypto world and I believe in the crypto future. So I have spent the past 8 years studying as much as I can and sharing my own experiences with people. I am writing now about new trends as a freelancer and consultant at Paybis.com