Bitcoin (BTC) Price Prediction For 2021: Has Bitcoin Become the Ultimate Safe Haven Now?
Skerdian Meta • 9 min read
Bitcoin (BTC) – Forecast Summary
|Bitcoin Forecast: H1 2021|
Price: $70,000 – $80,000
Price drivers: Market sentiment, Elon Musk/Tesla, COVID-19
|Bitcoin Forecast: 1 Year|
Price: $100,000 – $120,000
Price drivers: Safe haven status, Post COVID-19, Hawkish central banks
|Bitcoin Forecast: 3 Years|
Price: $150,000 – $200,000
Price drivers: Positive risk sentiment, Safe haven status, Bitcoin developments, Global economy
The surge in cryptocurrencies was strong during most of February, but it has stopped now, after the major retreat during the last week of February. More big names are entering this market, as Elon Musk walked the walk by the middle of February, after making the talk a week earlier, sending Bitcoin above $ 50,000, reaching $ 58.300. Elon Musk who posed #Bitcoin in a message in Reddit and the first surge after January’s pullback came soon after. Bitcoin made a turnaround in the last week of January, after it had been retreating lower during most of last month. It came off the highs, but reversed from below $ 30,000 again, where it seems to have formed a support zone above the $ 29,000 level. The price then surged higher, climbing to $ 38,000, as the last week of January got underway. Elon Musk’s message was one of the reasons for the $9, 000 jump in two days.
After the surge in the first week of January, the following weeks were bearish for Bitcoin, retreating from above $ 40,000. But, the relentless bullish momentum in cryptos pulled Bitcoin higher again, together with Elon Musk’s comment on Reddit. This Monday, in the second week of February Musk’s Tesla company bought a massive $ 1.5 billion worth of Bitcoin and expects to begin accepting this crypto as a form of payment. This was according to a SEC filing on the matter, with Tesla saying that:
“Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt.”
Today Bitcoin joined made another strong bullish move, as buyers pushed above the early January highs. Right now Bitcoin is trading at around $ 53,000 after breaking $ 50,000 a while ago and the upside momentum is only picking up pace on the long term, despite the latest retreat from the highs, which sent the price below $ 50,000. That retreat came after Musk’s comments suggesting that Bitcoin is not exactly physical Gold, which sent the price more than $ 15,000 down for some time, but it’s back above $ 50,000. trading at $ 550,00 now and heading for new highs as cryptos bounce after the retreat in February.
Last year brought tremendous change in the cryptocurrency market. Cryptocurrencies turned from risk assets into safe havens in a matter of months, surging like never before, with Bitcoin leading the pack by far. This cryptocurrency was trading at around $ 42,000 in the first week of January 2021 according to most Bitcoin brokers. In our previous long-term Bitcoin price prediction in September last year, we predicted that the price would surge, as indications suggested; now Bitcoin has beaten our predictions. With everything that happened last year, including the uncertainty about the future of the global economy and politics, all currencies increased tremendously, and cryptocurrencies began to draw a lot of attention, for some safety.
The cryptocurrency market surged higher, particularly in the last three months of 2020 and so far, the momentum is continuing in 2021, which suggests further upside momentum. However, while Bitcoin has been absolutely surging, few other digital coins have made record highs that can match Bitcoin’s performance, and there are even certain cryptos that are completely missing out on the surge. So, Bitcoin continues to be the leader of the pack in the crypto market, and it is attracting big money from major investors, which has turned it into a respectable investment instrument.
Recent Changes in the Bitcoin Price
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So, the Bitcoin price prediction and the technical analysis, which we will take a deeper look at in this forecast, point to further bullish momentum for the main crypto, while the recent developments in Bitcoin are also positive in the long run. The sentiment in the digital currency market has been extremely positive in recent months, and it is only getting better for altcoins, and this is spilling over into 2021 as well, so everything points up for Bitcoin at the beginning of this year, although the situation might change, as it did after the first “gold rush”, when it crashed down in 2018, but we will keep you updated with live forex and cryptocurrency forecasts.
Bitcoin, which is considered the most important cryptocurrency, has totally lived up to its reputation as a leader in the crypto market, which it gained since the conception by the founder Satoshi Nakamoto. After the surge we saw in the crypto market at the end of 2017, when Bitcoin almost reached $ 20,000, the price dropped again, and traded within a range for two years, until the last three months of 2020, when the “gold rush” for cryptocurrencies returned again, and we saw Bitcoin surging close to $ 42,000.
Bitcoin Price Prediction for the Next 5 Years
Crypto Market Sentiment
The sentiment in the cryptocurrency market kept switching on and off in previous years, turning them bullish, then bearish again, until late 2020. However, since October last year, the market sentiment has turned quite positive for the crypto market as a whole, and it is not showing any signs of turning back. After the surge we saw in this market at the end of 2017, followed by the reversal at the beginning of 2018, the sentiment in the cryptocurrency market was mostly neutral until the beginning of 2020. As a result, the greater portion of the cryptocurrencies traded mostly sideways until the beginning of 2020. The sentiment improved in the cryptocurrency market at the beginning of last year, and they started to turn bullish in the first two months, but the outbreak of the coronavirus in Europe in late February turned the sentiment negative initially, sending altcoins crashing lower until the middle of March. But, we saw a sudden reversal back then, and the sentiment in the crypto market has been improving ever since, as you can see in the CryptoIndex 100 below.
CIX 100 Index
This crypto index was started in late 2018, and initially, it bounced up and down between 0.20 and 1 until the end of October 2020, when the breakout happened. The announcement by Paypal to adopt cryptocurrencies as a means of payment on its platform helped the sentiment improve further in October, but the breakout came in November, and in January 2020, the CIX 100 index reached 2.75 points. Bitcoin has made the most of the positive sentiment in the crypto market during the last few months, while other altcoins, such as Ripple or Litecoin, haven’t benefited much. Ethereum is heading for the highs at $ 1,420.
Has Bitcoin Become the New Gold?
At the end of 2017, the attention of the financial markets and the broader public turned to the cryptocurrency market for the first time, acknowledging it as a separate and important market. But, with 2020 turning out massively bullish for the cryptocurrencies and the upside sentiment continuing into 2021, 2017 doesn’t look so dramatic anymore. Perhaps the crash that followed in 2018, after the surge at the end of 2017, was dramatic, but here at FXLeaders, we don’t anticipate another such crash in the crypto market, particularly when it comes to Bitcoin. There might be a deep pullback, say from $ 40,000, where it was trading on January 10, to $ 20,000, which was previously the ultimate resistance. But, we don’t expect a reversal below $ 10,000.
The reason for this is that the status of the crypto market seems to have shifted. Digital currencies were considered a market with high risk, where traders would invest during times of positive risk sentiment, considering the high volatility and large spreads. Now, traders are turning to cryptocurrencies at times when the uncertainty is high, which makes them safe havens – and even more so than the traditional ones, such as the JPY or Gold, especially since the Japanese Prime Minister Shinzo Abe handed the resignation in August 2020. The uncertainty was really high in 2020, due to the coronavirus, the economic meltdown, US politics etc. Everything became too risky to buy, except for stock markets perhaps, which benefited from all the stimulus programmes by governments and central banks around the world.
The cryptocurrency market had a massively bullish year, absolutely on its own merit. With the risk becoming too high for normal currencies, traders and investors turned to the crypto market, thus giving it safe-haven status. The bullish trend in gold and silver ended in August 2020, while cryptocurrencies, and Bitcoin in particular, have been positively surging. This has attracted major investors
Bitcoin, the Market Leader in Cryptocurrencies
As we explained above, the digital currency market turned extremely bullish in the last few months of 2020, and so far, the trend has continued in the first few weeks of 2021. The crypto market has finally reached the $ 1 trillion mark, which seemed a long way off at the beginning of 2020. Even a few months ago, in October of 2020, the total market cap for the whole crypto market was only around $ 330 billion, which was just a third of the value three months later. The market capitalization of Bitcoin as of 10 January 2021 is a whopping $ 726 billion, which accounts for the lion’s share of the entire market, at around 70%.
Bitcoin has been the leader in the crypto market since the beginning, since it was the first digital currency to go live. There have been many ups and downs, with new coins coming out of Bitcoin’s hard forks, and scandals etc, but Bitcoin has maintained its status as the leader in this new market, and in fact, it has strengthened its status with the latest surge, increasing the difference in value and the market cap compared to other cryptocurrencies. It was Bitcoin indeed, that started the surge in 2017, and again in 2020. As the leader in the crypto market, Bitcoin also attracts the biggest investments.
Bitcoin has outperformed all other markets
Besides being an investment target for traders who like to invest in risky assets, in Q4 of 2020, Bitcoin attracted large funds from big investment companies and private and public institutional investors, making its foundations even more solid. In fact, the rally of the last few months has mainly been driven by large institutional investors, such as MassMutual which bought $ 100 million Bitcoin in December 2020, Skybridge Capital which invested $182 million, also in December, and Guggenheim, which filed to invest up to $ 500 billion or up to 10% of its $ 5 billion macro fund in Bitcoin. This suggests that we won’t see a crash like the one we saw at the beginning of 2018, since this is big money, invested for the long run.
Possible Downsides to the Bitcoin Surge
While the performance of cryptocurrencies was great during 2020, there are some factors which might restrict or slow further gains for Bitcoin. Besides the safe-haven status that Bitcoin has acquired in the past year, one of the main reasons for the surge was the fact that fiat currency has been flowing extensively. Governments and central banks have been throwing cash through the monetary and fiscal stimulus programs and some portion of this cash has been flowing into the crypto market. But, while banks and governments won’t turn the tap off in 2021, they are not likely to increase the packages further, from what has been announced so far. But they might hint at starting to end these programmes by 2022, which will have a negative effect on the cryptocurrency demand.
The mining difficulty has increased together with the surge in the price
Another factor that might weigh on Bitcoin’s bullish momentum in the months ahead is the difficulty involved in mining. As Bitcoin becomes more expensive, the mining revenue has increased, having tripled since August. But, this has attracted many more miners to the game, especially large scale institutional ones, such as mining firms like Riot Blockchain (RIOT) and Marathon Patent Group (MARA), which placed similar pre-orders for 31,000 and 90,000 machines respectively in 2020. Manufacturers of mining machines are not able to keep up with the demand, which has contributed to increased difficulty in mining. The chart above shows that as Bitcoin headed for $ 40,000, the difficulty rose to above 20 trillion, and it will continue to grow, which will be a burden for Bitcoin, in terms of keeping up the pace of the increase in the long run. Nonetheless, the Bitcoin price prediction for the coming quarters remains bullish.
The $ 40,000 level has been broken now
Looking at the monthly Bitcoin chart, we see that the price was trading in a very tight range for several years, until early 2017, apart from a jump in late 2013, which cooled off pretty quickly. That shows that the attention on digital currencies was low until it surged in 2017. Moving averages were providing support, but they lost touch with the price in 2017, although after the reversal in 2018, the 50 SMA took up that job again and stopped the decline. A bottom was put in place for Bitcoin above $ 3,000, and we saw a bounce to $ 13,847 in 2019. The bounce didn’t last though, and for the next year, the trend turned bearish once again, as Bitcoin headed for $ 3,000, after the initial coronavirus crash. But, the moving averages held, despite being pierced, and the big bounce began, although the surge was official after the break of the 2017 high, just under $ 20,000.
The 10 SMA has finally caught up with the price on the daily chart
On the weekly chart at the top of this article, the 200 SMA (purple) was the ultimate support for Bitcoin, although moving averages and previous support and resistance levels have lost importance now, as buyers are not waiting for them to catch up, preferring to trade on pure sentiment. On the daily chart, the 20 SMA held as support in November 2020, after the first surge in October, and since the break of the $ 20,000 level in December, Bitcoin hasn’t looked back, and the 20 SMA hasn’t been able to catch up. So, the charts remain quite bullish in January, and the Bitcoin price prediction doesn’t suggest a bearish reversal like we saw in 2018.