While Bitcoin may be one of the most unpredictable and volatile assets available to traders, the asset’s continual peaks and troughs are becoming increasingly familiar in the cryptomarket.
Having initially grown by 72% during January 2021 and broken through the $50,000 barrier earlier this month, for example, Bitcoin has suddenly plunged back to just $44,647.24 at the beginning of trading on February 26th.
As the market leading crypto token once again begins its inevitable price ascent, investors could be left wondering what on earth they should do next. Here’s a breakdown of how the asset has fared of late and its likely portents for the future.
The Rise and Fall of Bitcoin
Bitcoin enjoyed a strong bull run through 2020, achieving an unexpected breakout above $40,000 as the asset more than doubled its previous peak value of $20,000 at the end of 2017.
This trend continued (and indeed, accelerated) in the first month of 2021, driven by increased adoption rates and the news that Elon Musk’s Tesla had purchased $1.5 billion-worth of Bitcoin and intended to begin accepting BTC as payment in the near-term.
This prompted predictions of further price growth through 2021 and beyond, with former White House communications director Anthony Scaramucci suggesting that BTC could “easily trade at $100,000” during the next 12 months.
However, the buy-up undertaken by Tesla arguably sent the price higher than the real-time market could bear, triggering a 20% decline immediately after the initial spike. Entrepreneur Bill Gates has also recently spoken negatively about the viability of Bitcoin as an asset, particularly for typical investors who aren’t as wealthy as Elon Musk.
It was this that precipitated the recent drop in value, raising issues about just how high the price of BTC can increase before facing a steep and inevitable correction.
By the end of February 26th, the price of Bitcoin had even begun to climb once again, leaving investors scratching their heads as they considered their long-term options.
The Future Outlook for Bitcoin
In many ways, Bill Gates’ attitude to BTC reflected the way in which corporations and traditional financial institutes continue to resist the same charms that woo investors.
According to analysis by Oanda, this skepticism is driven by central banks, while a number of blue chip corporations and CEOs have revealed that they don’t intend to invest in Bitcoin anytime soon (although they may begin to accept crypto payments if the demand is high enough amongst customers).
Until this changes, it’s hard to see Bitcoin sustaining any breakout above $50,000, at least without sustained volatility and interim price fluctuations.
However, this doesn’t mean that Bitcoin should be completely ignored by high-volume and wealthy investors. The reason for this is simple; as BTC spent much of 2020 mirroring the performance of gold and emerging as a viable safe-haven for investors during the coronavirus pandemic.
With the global economic climate still precariously placed, Bitcoin remains an asset with immense long-term potential, with increased adoption rates and the rise of third-generation blockchains (which will introduce greater credibility and efficiency into the market) making a future breakout above $100,000 and beyond increasingly likely.
You need only look at how much the price has increased since the beginning of 2018 despite its continued fluctuation to gauge this potential, while some experts have estimated that BTC could boast a total market cap that’s in excess of $3 trillion by 2025.
This would translate into a coin value of around $140,000, creating close to a three-fold return for those who entered the market at the current valuation.