Is another crypto winter in store for 2021?

With Bitcoin’s price continuing to set new all-time highs, concerns are developing around whether the surge is sustainable.

• Bitcoin volatility reached its five-month high in November.
• Since the start of 2020, premier cryptos such as BTC and ETH have exhibited a market cap increase of 277{cbf6da10fac2230370cea9448ed9872290737d25c88b8c8db3eefaf8c399e33d} and 445{cbf6da10fac2230370cea9448ed9872290737d25c88b8c8db3eefaf8c399e33d} respectively.
• The narrative around Bitcoin replacing gold is gaining momentum.

Unless one’s been living under a rock for the last couple of months, there’s no way news of Bitcoin smashing its previous all-time high of $20,000 would have missed anyone’s ears. In this regard, the flagship cryptocurrency is currently hovering around the $28,000 mark, with many experts predicting its value to increase – above the $30k threshold – over the course of the coming year.

Furthermore, it bears mentioning that since 2015, Bitcoin and Ethereum have showcased exponential gains of 70,974{cbf6da10fac2230370cea9448ed9872290737d25c88b8c8db3eefaf8c399e33d} and 5,295.16{cbf6da10fac2230370cea9448ed9872290737d25c88b8c8db3eefaf8c399e33d} respectively. To put things into perspective, over the same time period, premier stock options such as Tesla, Amazon and Apple displayed returns of just 1,278.85{cbf6da10fac2230370cea9448ed9872290737d25c88b8c8db3eefaf8c399e33d}, 2450.02{cbf6da10fac2230370cea9448ed9872290737d25c88b8c8db3eefaf8c399e33d} and 391.72{cbf6da10fac2230370cea9448ed9872290737d25c88b8c8db3eefaf8c399e33d}.

Despite all of these positive developments, many prominent individuals from the traditional finance sphere, including renowned economist and financial strategist David Rosenberg, have continued to claim that the ongoing crypto bull run is just a “bubble” that is destined to burst once again, much like it did in 2018.

How to buy Bitcoin

No, 2021 will not be a flashback of 2017

To get a better understanding of where the market will head in 2021, Finder reached out to Kris Marszalek, CEO of Crypto.com. In his view, Bitcoin hitting its new all-time high has definitely been a watershed moment for the entire industry and one that will cement the flagship digital asset’s position as a tangible investment avenue in the eyes of investors all over the globe. He added:

“The major difference compared to the 2017 bull run is that the price action is now driven primarily by large allocations by institutional players, including a $750m position taken by Ruffer, which is a clear sign of market maturation. We expect another wave of institutions to come into the market hard in early 2021, after they lock-in their 2020 results, further solidifying Bitcoin’s position.”

Similarly, to ascertain whether the above-stated assertions made by Rosenberg and other prominent individuals such as Mark Cuban regarding Bitcoin being “all hype” have any substance to them, Finder spoke with CryptoYoda, an independent financial analyst and crypto commentator who has been actively involved in this space since 2014. He pointed out that a vast majority of high-profile individuals associated with the traditional finance sector are backers of a debt-based fiat financial machine that has helped maintain a system that “perpetually accelerates debt-issuance and thus money devaluation” and should not be paid any heed to, especially when it comes to crypto-related matters. He added:

“This is not only the greatest monetary shift in history, this is the takeover of a whole generation that grew up with and on the Internet. Those who don’t get it will be left behind. We are in control now, but not through the means of politics but by personal choice and by choosing financial freedom and self-autonomy.”

Lastly, Ben Zhou, CEO of ByBit highlighted that the entry of institutional players into this space has cemented Bitcoin’s position as a hedge against economic uncertainty and a store of value in the eyes of many, adding that if one were to look at Bitcoin’s value surge using a wide time lens, the crypto has outperformed pretty much all other asset classes and has been in an overall bull run despite all of its previous value corrections.

Forget bear markets, Bitcoin seems primed to replace gold in 2021

While BTCs value surge over the $20K mark is nice; fundamentally, it may not be as important as other developments on the horizon. In this regard, Joel Edgerton, COO of bitFlyer USA, believes that Bitcoin has now grown beyond all hype and has crossed the trough to now be considered a normal investment asset, claiming: “It can realistically replace gold and we should be targeting gold’s market cap of $9 trillion or roughly 25X.”

Like gold, cryptocurrency’s value as a hedge lies in its inflation-beating qualities. Traditionally, investors have used gold to protect themselves against stock volatility but now, crypto is slowly emerging as a mainstream investment class, especially among millennials. Among its many advantages, Bitcoin offers not only a high degree of accessibility but also other storage-related benefits that no precious metal can afford. On the subject, Jay Hao, CEO of cryptocurrency exchange OKEx, pointed out:

“Gold has long been a safe haven asset and there are many people who see Bitcoin as a safe haven as well based on the fact that BTC shares many of the same qualities as gold. There is a very strong case for this as we have seen from many fundamental studies such as Guggenheim’s thesis that says Bitcoin should be worth $400,000 based on its scarcity and value relative to gold as well as its unusual value in terms of transactions.”

Looking Ahead

Even though crypto tech stands to change the way in which the global financial ecosystem works, it is not perfect by any means. For example, blockchain analytics firm CipherTrace recently released a report claiming that between Q1-Q3 alone, losses from cryptocurrency thefts, hacks and frauds amounted to a whopping $1.8 billion. That being said, it stands to reason that as we move into the new year, many of these creases that exist in relation to this yet nascent domain will slowly yet surely be ironed out.

Disclosure: The author may hold the cryptocurrencies discussed in this article at the time of writing.