Bitcoin’s rally has shown very few signs of slowing down, and the world’s largest cryptocurrency, which went from a low of around $5,000 to $30,000 in 2020, has continued its rise by doubling to over 62,000 in 2021. However, this peak has now withdrawn, with the token trading at around $35,000, and there has been a general downtrend in the price of most cryptocurrencies, not just Bitcoin, over the last few weeks and months. Cryptocurrencies are quite volatile and can see huge swings in their price in a short span of time, so predicting where the price will end up in 2021 is quite difficult. Nevertheless, we will now look at the various possibilities for where Bitcoin’s price is expected to move in 2021.
Having gone to as high as $64,829.14 (its lifetime high) in April 2021, it is pretty obvious that the current price of Bitcoin is quite a way off that peak, and that there has been a sell-off in recent weeks. The crypto industry is still quite prone to reacting to announcements and developments from key players and stakeholders in a big manner, and this latest sell-off seems to have been sparked by an announcement by Tesla. The autonomous car maker recently stated that it would stop accepting payments for its cars in Bitcoin, due to concerns around the energy consumption of Bitcoin mining, as well as crypto mining in general, which goes against Tesla’s position as a manufacturer of electric vehicles. This is the biggest reason for the recent drop in Bitcoin’s price, as Tesla is the first major company to decide to cut ties with Bitcoin on account of environmental concerns. It is interesting that Tesla was also one of the first to allow payments in Bitcoin in the first place, and that announcement, a few months ago now, had sent the price of the token soaring. Tesla has also bought $1.5 billion worth of Bitcoin, and many observers believe that this latest development may just be an elaborate ‘pump and dump’ scheme, where Elon Musk and Tesla have manipulated the price into going up, and are now selling the token to make a profit and therefore engineering a drop in price. Of course, this is just speculation at this point, and there has been no indication that Tesla has sold any of its Bitcoin at this point. Nevertheless, this episode shows how the price of Bitcoin, and that of other cryptocurrencies as well, remains extremely vulnerable to price swings based on comments and news from the industry.
It is also important to remember that while Bitcoin may have dropped by nearly 30% in recent weeks, it is still up by quite a margin on a year-to-date (YTD) basis. Bitcoin ended 2020 at around $29,000, so that is still around a 50% return that the token has delivered so far this year. The overall consensus in the market at the moment is that Bitcoin is expected to be on a downtrend for some time, with bearish sentiments dominating the market. Even so, long-term, the token is expected to rebound significantly, and there are still projections that Bitcoin could hit $100,000 at some point later in 2021. One of the biggest drivers for this is continued institutional investment. The biggest difference between this sustained crypto rally, and the much shorter one that we had seen back in 2017, is that this rally has been fuelled by institutional investors. Big companies and corporations have decided to put their money into crypto, and that has helped support price levels and take the industry to where it is today. That level of support is vital if Bitcoin is to have an upward trajectory this year. Conversely, if we see institutions getting spooked and pulling their money out, it could trigger an even bigger sell-off, which would bring back memories of the 2018 crypto crash.
Crypto is likely to remain extremely volatile for the near future, so it is recommended that potential investors do their due diligence before investing, and only invest what they are prepared to lose. Bitcoin, as the gold standard for cryptocurrencies, is going to be a headline maker in the industry for a long time, and it will be interesting to see if it manages to touch that fabled $100,000 mark this year, or whether it continues on its current downward trajectory.