The growing interest in cryptocurrency and corporate adoption of Bitcoin has been a key driver in the sharp gains we saw earlier this year. Bitcoin (USD:BTC) reached a 52 week high of $64,788 midway through April before plummeting back down below $30,000. It is clear the increased popularity of crypto currency as an investment amongst retail investors and institutions is driving sharp fluctuations in BTC. Wallstreet analyst at Oppenheimer, Ari Wald recently noted investors should expect high volatility as a result of the increased interest in crypto that we have seen over the past few months. With Bitcoin bouncing back this week now trading 10.72% higher, this article will breakdown everything investors should know about Bitcoin and its outlook in 2021.
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What are analysts forecasting for Bitcoin in 2021?
Firstly, it is important to get an understanding of what the Wallstreet or “smart money” consensus is regarding Bitcoin. In contrast to the equity markets, analysts have less fundamental data to support their thesis with cryptocurrencies.
We tend to see analysts commenting on momentum and trends when forecasting crypto-currency prices. As Bitcoin is the largest cryptocurrency (by market capitalisation), we tend to see a greater pool of analysts and institutions weighing in. In addition, with Bitcoin now accepted as an investable asset by institutions such as Goldman Sachs, we can expect more large institutions to cover Bitcoin in the near future.
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Bullish forecasts for Bitcoin in 2021
Over the past few years, we have witnessed more analysts becoming bullish on the idea of crypto-currency and Bitcoin as a viable asset within a portfolio. For example, Tom Lee from Fundstrats has recently increased the firms year end price target of Bitcoin to $125,000. Lee noted that he does not believe Tesla’s decision not to accept Bitcoin payments would effect the overall bullish sentiment towards Bitcoin.
In addition to Tom Lee’s bullish thesis, we have seen institutions capitalise on the sell off. Microstrategy CEO Michael Saylor announced the firm had acquired an “additional $10 million in Bitcoin at an average price of $43,633, lifting total holdings to 92,079 BTC for $2.251 billion with an average price of $24,450.” It is clear the firm is confident in the outlook of Bitcoin by doubling down on the sell off.
Bearish forecasts for Bitcoin in 2021
Interestingly, we have seen some bulls who have now turned conservative over the recent “build up” of long term positions in Bitcoin. JP Morgan analyst Nikolaos Panigirtzoglou initially listed a 12 month price target of $146,000 for Bitcoin at the beginning of the year. However, last month the analyst noted to investors that Bitcoin could suffer from momentum decay. Interestingly, in a recent CNBC interview Panigirtzoglou noted that BTC’s market cap would need to move above 50% again (share of bitcoin as a percentage of the total cryptocurrency market cap) for the bear market to be over.
Furthermore, Tallbacken Capital Advisors’s Michael Purves also noted the decaying momentum of Bitcoin last month. The CEO noted to investors “Trading bitcoin on the bullish side right now does not appear to have favourable risk-reward and if you have made profits, it seems like a good time to go to the sidelines for now.”
Overall, Bitcoins recent correction is a reflection of the unique risk/reward pattern we see with cryptocurrencies. The Bears argue that the increased volatility and momentum decay may continue to impact the Bitcoin price in the near future. However, with Bitcoin now balancing around the $35K mark, there is no doubt Bitcoin bulls are looking to capitalise on the downtrend.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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