BTC’s price to reach $300-$500k in 2021 By Victor Argonov, senior analyst at International investment firm, EXANTE
Q3 2020 hedge fund letters, conferences and more
Not too long ago, predictions that Bitcoin would cost $100 000 or more seemed extremely far-fetched. Such predictions were typically given by people who were personally interested in the currency's growth, such as the Winklevoss twins, and therefore could have been wishful thinking. However, when Citigroup announced that by 2021 BTC is going to go over $300 000, the market took it as a serious sign that one should wait before selling off one's assets as BTC's price nears the old records at around $20,000. Given the trends shown in the past and the current state of the market, the figure of $300,000 seems realistic enough.
The current situation favours a repeat of the 2013-2017 hype in 2021. Both the fundamental factors and the attitudes of the investors suggest growth, and only the exact extent of that growth is unknown as of yet. It is pretty much guaranteed that this rally will result in more than just a new record being set.
Principles Behind Past Bitcoin Hypes
There were many Bitcoin bubbles during the currency's history, and the largest ones grew in the years following the halvings. After the halving in 2012 BTC cost around $12. By the end of 2012 it cost around $20, by the end of 2013 it cost over $1100, and after the bubble burst in the spring of 2015 it cost around $200.
After the halving in 2016 BTC cost around $600. By the end of 2016 it cost around $1000, which was close to the previous record. By the end of 2017 it cost $20000, and after the bubble burst in late 2018 it cost around $3500.
After the halving in 2020 BTC cost around $9000. In late 2020 it cost $18000, close to the previous record, so how much will it cost in 2021?
Many investors believe that currently we are at the beginning of a bubble similar to the ones in 2013 and 2017. Let us see the trends they showed.
Trend 1. Previously, a 60-70% growth took place between the halving and the end of the year. By the end of 2016 BTC's price nearly reached the 2013 record.
Trend 2. BTC's price increased by a factor of 50 in 2013, and by a factor of 20 in 2017. In both cases it increased by more than an order of magnitude.
Trend 3. When the bubbles burst, BTC's price decreased by a factor of 3-4, to the level when there are almost no more sellers on the market. These are the “bottom” levels of any price drop, and they were found during other years too, besides 2015 and 2018. With each next year, these levels tend to double: BTC cost around $200 at the beginning of 2015, around $400 in December 2015, around $800 in December 2016, around $3000-4000 in December 2018, around $7000 in December 2019, and around $10000 in June 2020.
Will Citigroup's Prediction Come True if the Patterns Repeat?
The first trend is already showing quite well. The growth after the halving in 2020 turned out to be greater than during the previous times, but remains on the same order, which is around 100%. Like in 2016, the record of the previous bubble has almost been achieved in 2020. It is possible that BTC's price will go a little over this record by the end of 2020, at around $20-25k.
The second trend predicts that in 2021 BTC's price may increase by at least an order of magnitude, that is, by a factor of 10-20 to $200-500k.
The third trend predicts that the minimum likely price of BTC will be around $14000, with it dropping below that value being nearly impossible, and by the end of 2022 it may grow to $50000. If another bubble bursts in 2022, a decrease by a factor of 4-10 will be expected, from $200-500k to $50k.
This shows that Citigroup's predicted value of $300k is rather realistic, as it fits the patterns of previous hypes. And even after another bubble bursts, BTC will still cost much more than it does today.
Is There a Real Basis for a New Hype?
It is not clear yet whether the connection between the halvings and the booms that follow them is due to some fundamental law or mere chance. By itself, the halving may no more than double the price. If the miners' expenses remain the same, the minimum cost of breaking even from mining will double, as the number of the coins they earn will halve. The doubling of the price has already happened this year, from $9000 to $18000. Nevertheless, many investors believe that another hype leading to BTC's price multiplying simply because such hypes happened before.
Are they naïve in their expectations? Hardly.
Firstly, the fact that the investors expect a hype already stimulates a hype. The investors take a bullish attitude, and are unwilling to sell off their assets. They intend to see BTC's price multiplying.
Secondly, there are a number of external factors present currently that can stimulate the hype. These include Citigroup's prediction that BTC's price will exceed $300k (which signals the investors that the major players are favoring a new hype), another prediction by Citigroup that the US dollar is going to devalue by 20%, the inclusion of cryptocurrencies in PayPal accounts, and the expectation that the Biden administration will increase the dollar supply, but at the same time will enact more favourable policies for cryptocurrency users.
Thirdly, even if there will be no bubble, the trends shown over the years suggest BTC's price still being $50k by the end of 2022. This means that even the skeptics should expect growth.
