Bitcoin closed 2020 above $ 29,000, capping an astonishing rally in which it more than tripled, with analysts saying 2021 will certainly see volatility although its outlook remains less than clear.
Cryptocurrency has benefited from a number of events this year, starting with the pandemic – which prompted monetary authorities to print currencies, raising fears of inflation – to increasingly accepted bitcoin as a medium of exchange.
Bitcoin was launched in 2009 by one or more anonymous users as a decentralized digital currency unsupervised by an authority, with its transactions verified and settled through a distributed ledger.
Since its launch, bitcoin has seen its price drop from $ 0.0008 to almost $ 30,000 now in hopes that it could become the dominant medium of exchange of the future, although some economists have warned that such a line of thinking is quite speculative.
The cryptocurrency has also experienced high volatility: since 2016, it has declined 20% ten times, 30% seven times, and 48% plus four times.
So what does the outlook for Bitcoin look like?
After a rapid increase in 2020, the cryptocurrency could experience a near-term decline as the pandemic abates.
Miller Tabak’s chief market strategist Matt Maley has said he expects bitcoin to sell 25-30% in January.
“As the pandemic begins to fade a bit [and] maybe the liquidity becomes a little less plentiful, this (bitcoin) could be crushed like it has done many times in the past, ”he said.
Yet bitcoin continues to show promise from a long-term perspective, for the simple reason that it could eventually deliver on its promise as an instrument that could transform the way money is traded.
Michael Bapis of Vios Advisors recently told CNBC that investors should hold onto bitcoin if they have a long-term perspective – three, five, seven years.
“I just think you own it and put it aside for a long term investment and look at how it maybe transforms the currency and the world we live in today,” Bapis said.
Regardless of the bullish result, others, like John LaForge of Wells Fargo, warn that investing in bitcoin comes with its risk, comparing the speculative frenzy surrounding the cryptocurrency to the California gold rush of the 1850s that s ‘ended with a wet spit.
That’s not to say things aren’t improving for bitcoin.
And while investors have both a speculative and investing interest in bitcoin and cryptocurrencies in 2020, 2021 would focus on continued improvements between traditional and crypto markets,
Pierce Crosby, chief executive of financial data firm TradingView, said 2021 could see continued improvements between traditional and crypto markets – meaning digital currency could see greater adoption as an acceptable medium of exchange.
For example, in October 2020, Paypal said it would allow customers to pay through popular cryptocurrencies such as Bitcoin and Ethereum.
“There are many such use cases for crypto, and we expect them to grow rapidly in the coming year,” Crosby recently told Forbes.