Can the cryptocurrency continue its ascent or is it bound to crash down again?
2021 found the world’s most popular cryptocurrency in the middle of an upward wave. Bitcoin concluded its climb at the level of $42,000 in early January. However, by the end of the month it found the incentives to start strengthening again.
In February, Bitcoin reached a historic high of $57,371. Can the cryptocurrency continue its ascent or is it bound to crash down again?
Why is Bitcoin Increasing in Value?
One reason for the rally in cryptocurrencies over the last three months is that the markets seem to be more accepting of them.
Due to their nature, cryptocurrencies are not regulated. This is their biggest advantage and, simultaneously, the biggest reason for investors’ distrust in them. But recently, major players in the financial markets have been investing in Bitcoin to diversify their portfolios.
Most notably, Tesla CEO Elon Musk has been tweeting in favor of cryptocurrencies. Still, actions speak louder than words. Musk’s billion-dollar investment in Bitcoin sparked a big rally. Other prominent investors seem to have taken note and made similar decisions about their portfolios.
Besides more widespread acceptance, Bitcoin is also rising on risk appetite. Compared to last year, 2021 is expected to be a year of economic recovery.
Covid-19 vaccinations are happening all over the world. The United States specifically is carrying them out at an enviable speed. This is fueling hopes that the coronavirus pandemic will die down in the coming months.
In addition, the mood in the US has changed dramatically with Joe Biden becoming President. Biden is a much steadier figure than his predecessor and is unlikely to shock the markets with out-of-the-blue decisions.
Moreover, Biden is successfully pushing a $1.9 trillion stimulus package through Congress. This money will support the economic recovery of the United States.
Already there have been improvements in fundamentals out of the US, which have driven interest away from safe havens and into riskier assets such as Bitcoin.
2021 Forecast for Bitcoin Prices
As long as market sentiment remains risk-friendly and companies keep getting more accepting of Bitcoin, expect its value to increase. Galaxy Digital’s Mike Novogratz told Bloomberg that he expects Bitcoin to hit $100,000 before the year’s end.
The road to 100K might not be a straight one, however. Announcements about major investments in cryptocurrencies, or major businesses accepting Bitcoin as a payment method will fuel future rallies.
Nevertheless, at each new historic maximum many traders will close their positions to take their profits, which will cause short-term weakness. Thus, a cycle of rallies and profit-taking downward corrections is likely in store for Bitcoin.