Bitcoin has surged to a new all-time high of $19,712. Its adoption by payments giant PayPal, as well as its role in portfolios as a safe haven which can offer diversification away from other assets like equities and bonds, have caused a huge run up in its value this year. Its one year return is now over 170%, despite a minor pullback overnight, and experts continue to believe it can go higher still.
Speaking to the Daily Telegraph, Simon Peters at CFD broker eToro said there was more to come. “Bitcoin has broken through a critical price milestone and looks set to move higher. Three years on from its 2017 peak, the cryptoasset industry has matured and is seeing real traction with larger investors. They are using Bitcoin as a hedge to combat the prospect of higher inflation and continued government stimulus.”
Cryptocurrencies are not a passing fad
We at The Armchair Trader are now inclined to agree that cryptocurrencies are not a passing fad, but that they represent a very real and important part of the global financial infrastructure. While the FCA in the UK has banned the sale of derivatives based on cryptocurrency prices to retail investors, it seems to us that many traders are accessing an array of cryptocurrency prices through a variety of trading venues.
The price of Bitcoin has out-performed a number of other high performing indexes, beating the S&P 500, the DJIA and even the NASDAQ Composite. Bitcoin is up over 5000% in the last five years. Other leading cryptocurrency prices are also having an awesome 2020, with Ethereum up 365% and Chainlink up 751% (as of 23 November prices).
Massive and growing interest in Bitcoin as an asset class
Los Angeles-based Bitcoin IRA, which provides the world’s first, largest and most secure IRA technology platform, allowing investors to buy cryptocurrencies and other digital assets for their retirement accounts, reported last week that it has seen over $60m in transactions so far in 2020 and over $500m in transactions since the company was launched in 2016.
As if that was not enough, 80% of all central banks around the world now say they are planning digital currencies, and Citibank has projected that the Bitcoin price may grow to reach $310,000 by the end of next year. US hedge fund Guggenheim Partners has field with the SEC to request it be allowed to allocate up to 10% of its assets to Bitcoin. For hedge funds trying to figure out where to invest in the choppy waters of financial markets next year, Bitcoin is looking increasingly attractive.
Analysts predict big gains in Bitcoin price in 2021
Several analysts are now predicting big gains for Bitcoin as more institutional players enter the market. Precise predictions for its performance in 2021 are tough though; as its value is determined by an open market that never closes, there are also massive challenges in terms of volatility to cope with.
Ali Mizani Oskui, CIO at asset manager FICAS AG in Switzerland, is slightly less bullish than Citibank, but even he is now forecasting a price of between $200,000 and $300,000 for Bitcoin somewhere between December next year and March 2022. He discounts the US election as having any impact on the price.
“Cryptocurrency’s future outlook is still very much in question,” he admits. “Proponents see the limitless potential, while critics see nothing but risk. Managing the risk is the first thing to think of. All investors who are going to work with cryptocurrency today must understand what the currency is about and have a clear plan of action for all sorts of scenarios.”
The outlook for Bitcoin in 2021 certainly looks bullish to us. While we might expect a little retracement for the asset class in the next few weeks, the fundamentals driving its growth are impressive.