Bitcoin price predictions are ten a penny in the crypto world, from the outlandish $400,000 recently proposed by Max Keiser to the prophecies of doom espoused by the mainstream media. However, in between those predictions likely lies the truth, and with Bitcoin looking like it’s at the start of another two-year bull market, it’s worth examining what data we can to answer the big question – what will be the Bitcoin price in 2021?
Watch Out for Black Swans
When it comes to predicting the Bitcoin price in years to come, many factors have to be taken into consideration, some of which are known, some of which are unknown. Unknown events are often classified as ‘black swan’ events, large scale unpredictable events that can cause a market to collapse, such as global recessions or environmental catastrophes, like the current coronavirus outbreak.
In Bitcoin’s case, a black swan event could be something like Bitcoin being outlawed in the United States, and it is impossible to factor events such as this into future plans, so we will base our considerations as being unaffected by such events.
Bitcoin’s Strong Fundamentals
To predict what the Bitcoin price might be in the future we need to examine its fundamental principles and its design to make sure its foundations are still strong enough.
Those who understand Bitcoin will likely know about its deflationary nature, which is a key tenet of its design. In contrast to governments, who literally can print money out of thin air, the rate at which new Bitcoin is added into circulation decreases every 210,000 blocks, approximately every four years, in an event known as the ‘halving’.
The halving reduces the amount that miners are rewarded for adding new blocks to the chain, ensuring there cannot be a glut of new Bitcoin sloshed into the market and diluting the price – its introduction is carefully planned, with the last one set to be mined in 2140. The next halving is due in May 2020.
The Lindy Effect
Bitcoin is also the vanguard of a new financial system, the first genuine threat to the fiat system since its creation. We have seen awareness and adoption of Bitcoin only increase during the eleven years it has been around, with regulations being put in place globally to ensure it is used less and less by the wrong people, enhancing its reputation as a result.
This phenomenon is known as the Lindy effect, which is the idea that the future life expectancy of a non-perishable things like books, technologies, and ideas is proportional to their current age, implying that for every additional period Bitcoin survives its life expectancy and resilience increases.
If we are to assume then that Bitcoin will still be around in 2021 its resilience and longevity will have increased proportionally, as should its acceptance and utilization, which of course only works in its favour in terms of price.
Finding Patterns in Historical Performance
There is also another avenue we can go down to analyze Bitcoin’s potential price in 2021 – technical analysis. We have a number of ways of using Bitcoin’s past performance to indicate future behaviour, with the most frequently cited example being the logarithmic chart which plots the durations and variations of Bitcoin’s past peaks and troughs and extrapolates them into the future:
As we can see, Bitcoin has tended to follow a pattern of continual growth, with each halving leading to a bull run around a year later, with the increases becoming shallower and the length of time in between becoming more elongated.
Following this model, we can see that by December 31, 2021, Bitcoin will be around the $60,000 mark. However, there are a variety of logarithmic models out there, all of which vary slightly, with some having Bitcoin hitting a high of $200,000 in 2021.
A second model that we can use is called the stock to flow model, which is a figure that illustrates how many years, at the current rate of production, are required to achieve the current stock. It uses averages from 10- and 365- day performance to track Bitcoin’s price and extrapolates is accordingly:
As we can see from this chart, which don’t forget uses an entirely different way of calculating the potential future Bitcoin price, December 30, 2021, will see a price of around $97,500.
Wall Street’s Grubby Hand of Manipulation
There is one other fly in the ointment that could prevent Bitcoin from hitting these heights in 2021 – price manipulation. In October last year, former Commodity Futures Trading Commission (CFTC) chairman Christopher Giancarlo admitted that various members of the government worked with the futures trading giants the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (Cboe) to “pop” the Bitcoin bubble in 2017.
Should Bitcoin once more get too big for the government to be comfortable with, will they yet again deploy the big guns to bring it down? It is far from unthinkable. Wall Street has already got its claws into Bitcoin, so will it be a case of pulling the plug when they feel like enough’s enough?
In conclusion, assuming that no black swan events occur to crash the Bitcoin price and that Wall Street allows it to flourish as expected, there is every likelihood that the Bitcoin price will reach at least $80,000 mark in 2021, with a post-halving bull run potentially taking it towards the $100,000 figure. If you wanted more reason to hodl, that would be it…although there’s no harm in having stoplosses in place, just in case.
Remember, predicting the future Bitcoin price is nothing but a fun exercise, and all predictions, no matter who the source, should be taken with a pinch of salt and should not influence your trading practices.