Those with a keen interest in bitcoin are accustomed to dealing with large numbers. A fixed monetary supply of 21 million, 18.5 million of which has already been generated; 100 million satoshis per coin; a market cap of over $600 billion driven by a 9,000,000% rise in value in the 2010s.
On and on it goes, an endless series of figures forming digital rain like the iconic scene in The Matrix. While bitcoin is about much more than numbers – namely privacy, liberty, and fairness – the world’s favorite cryptocurrency is destined to forever be synonymous with integers.
The question on everyone’s lips, however, is concerned with just one of these numbers: how valuable bitcoin can become. A new paper by AAX Research explores this question at length.
Schooling Investors on Bitcoin
Entitled “Bitcoin in 2021” and ostensibly compiled to provide investors with food for intellectual thought, the 23-page document from AAX summarizes the asset’s history as an investable commodity and analyzes metrics such as trade volume and liquidity to suggest what might be on the horizon. The paper also looks at growing institutional support for the currency, with reference to the actions of major players like Grayscale, PayPal, and Square.
While many readers might understandably sift through the pages in a bid to learn how valuable bitcoin might be a year down the line, such papers are – of course – inexact sciences. Nonetheless, they are useful for providing context and summarizing the various factors that might coalesce to push bitcoin in one direction or another.
Reflecting on the events of 2020, for example, the paper perspicaciously observes that “soon after the first $1,200 stimulus checks were handed out in the U.S. to reduce the immediate impact of mandatory lockdowns, Coinbase and other cryptocurrency exchanges noticed a significant increase in deposits of the exact same amount by US clients.”
As we know, bitcoin enjoyed major highs and lows last year. In March, in the wake of the COVID-19 crisis, the asset tumbled to a 12-month low of $3,867. At that stage panic was the prevailing sentiment and investors were dumping perceived risk-on assets en masse. For many, the world had unalterably changed and bitcoin’s status as a safe-haven was invalidated overnight.
How quickly those bearish impressions changed. As the AAX paper notes, bitcoin “bounced back by approximately 162% in the 55 days following its mass sell-off,” compared to a 47% rise in the S&P 500. By the end of the year it had surpassed its previous all-time high and surged confidently towards $30,000, a milestone it achieved early in the New Year. So, what’s next?
Bitcoin Price Predictions for 2021
According to AAX, bitcoin has now entered its “Decade of Adoption,” and citing advancements in accessibility, infrastructure, volume and liquidity – not to mention the sustained resilience of the wider crypto markets – the authors are bullish.
Despite the stock to flow model indicating that bitcoin could hit $100,000 by the end of 2021, they believe this is rather unrealistic, concluding that key targets for 2021 are $36,000 and $55,000. Moreover, they speculate that $55,000 could be hit within the first quarter.
So, what kind of sentiments are being expressed elsewhere? How big a year could bitcoin have in 2021?
According to investment bank JPMorgan Chase, competition with gold could push the cryptocurrency’s market capitalization beyond $2.5 trillion in the long term, implying a theoretical price target of $146,000. The bank’s strategists did, of course, stress that this figure was unlikely to be seen in 2021. A more modest projection was “between $50k-$100k,” though such price levels would prove unsustainable.
Another major Wall Street firm, Citibank, is even more bullish than JPMorgan. According to a leaked report, senior analyst Tom Fitzpatrick believes bitcoin could hit a high of $318,000 by the end of the year. Fitzpatrick echoed a common refrain among bitcoiners by referring to the asset as “21st century gold.”
— The Tie (@TheTieIO) January 3, 2021
To some, these predictions will seem outlandish. To others, they are reasonable, particularly given the fiat currency debasement that is the logical consequence of stimulus packages on an eye-watering scale. Governments around the world are continuing to print obscene sums of money to prop up economies that are struggling due to enforced shutdowns and supply-chain disruption. To those who enthusiastically endorse six-figure price predictions, bitcoin’s status as digital gold has been confirmed in the wake of such measures.
One thing all analysts seem to agree on when it comes to BTC price modeling: in 2021, number will go up.