Bitcoin’s Outlook Looks Promising in 2021Laura
Although 2020 was a difficult year, Bitcoin thrived, and its value more than quadrupled. This was primarily due to increased interest from major corporations and improved government stimulus measures, both of which helped drive the market’s frenzy. Now that Bitcoin is trading at a record-high, it’s important for investors to turn their attention to what lies ahead.
This new year could cause new factors to surface and help drive adoption and value creation. Here are the three overarching trends we’ve identified that investors, miners, and tech enthusiasts must watch in 2021.
Unlike Bitcoin’s previous rally in 2017, this current rally is being propelled by institutional investors and corporations. Payment platforms such as PayPal, Visa and Square integrated Bitcoin for the first time in 2020, while hedge fund managers such as Stanley Druckenmiller and Paul Tudor Jones II added additional exposure to the world of cryptocurrency.
However, retail investors have missed out on the rally so far. Although Google search traffic for the term “Bitcoin price” has hit an 18-month high recently, it’s nowhere close to its 2017 peak. Similarly, media coverage and social media chatter about the subject is far more subdued during this rally.
Nonetheless, retail investors have always driven BTC to new highs. If the average investor gets involved in this space in 2021, BTC’s rally could be boosted significantly.
National reserves and interest
On the other end of the spectrum, are sovereign wealth funds and central banks. Blockchain technology and Bitcoin is eliciting more interest from governments and central banks across the world. At least 12 countries, including Sweden, The Bahamas, France, the Philippines, Japan, Turkey, and Switzerland, are actively testing the viability of a Central Bank Digital Currency (CBDC).
Meanwhile, investors eagerly await the first nation to add Bitcoin as a strategic financial reserve. Such a move would legitimize Bitcoin’s value as a “digital alternative to gold” and cement its position as a part of the global economy.
While central banks haven’t added BTC to their strategic reserves yet, some corporations have recently done so. Most noteworthy is NASDAQ-listed Microstrategy, which has invested over $1B in Bitcoin in the last few months of 2020. The company now owns 0.182% of all Bitcoin that will ever exist. Other publicly-listed companies with BTC reserves include Square (0.2% of assets) and Argo Blockchain (7% of assets).
While sovereign and retail adoption is difficult to predict, it’s relatively easier to connect the rising value of Bitcoin with the predetermined limit on supply. As there can only ever be 21 million BTC in existence (the majority of which has already been mined), mining profitability could reliably expand in the near future.
This expansion will result in more profitability which will naturally attract more miners, and in turn, amplify BTC’s network security creating a virtuous cycle for investors.
Rise of Super Miners
This third trend is particularly noteworthy for investors. According to a recent report, the global cryptocurrency mining market is expected to grow at an annually compounded rate of 16.8% until 2026. The market is large enough, and expanding fast enough, to accommodate multiple miners across the world. However, competitive forces and the steadily increasing total hash rate will eventually push for greater consolidation.
In other words, the rise of super miners is inevitable. Miners with low-cost facilities in regulated markets and access to cheap public capital could probably leapfrog the competition.
With access to capital from both the UK and US public markets and operations based in low-cost Canada, Argo Blockchain could sustain its lead over the competition for the foreseeable future.
There is amazing potential for greater adoption of bitcoin. Coupled with the rise of super miners, there seem to be promising opportunities for investors in the cryptocurrency sector in 2021.