The bitcoin price is closely related to the state of the global economy, which will become local regulations and the halving of 2020.
These are all super interesting developments, but you cannot say with certainty what the economy is going to do, or how governments will regulate bitcoin. But we can talk about the effect of the halving on the price forecast of 2021.
Halving causes the price to rise
So far, there have been two bitcoin block halves. This means that the rewards for miners are halved every four years. If you want to read more about halvings, read this article.
- The first halving took place on November 28, 2012.
- The second halving was on July 9, 2016.
- The third took place in May 2020.
This halving is one of the most important indicators to determine your expectations for 2021. The past showed that after every halving, the course flares very hard for a year and a half.
- The bitcoin price was $ 12.50 during the first halving. Eighteen months later again $ 665. That is an increase of no less than 5180%
- During the second halving, bitcoin was worth $ 650. A year and a half later, bitcoin reached its all time high with $ 20,000. An increase of at least 2977%!
The effect of the next halving
The third halving was therefore in May 2020, a year and a half later is November 2021. If we can learn something from the past, the course will reach its absolute peak a year and a half after a halving.
You can also see that in the logarithmic graph below. Each green box starts at the halving and ends a year and a half later.
Remember that bitcoin is still young and there have only been two halves. You can decide whether you can speak of a trend with two halves. If so, this is a good indicator to include in your expectation of bitcoin in 2021.
Bitcoin is becoming increasingly scarce
But you can also look at the halving of May 2020 in a different way. New bitcoin is becoming twice as scarce. Instead of adding 12.5 bitcoin every ten minutes for four years, there are only 6.25 after the halving.
That is not an expectation, that is a fact.
Only 21 million bitcoins are made. This is an intrinsic part of bitcoin's protocol. More and more people will use bitcoin for different purposes, but fewer and fewer bitcoins are freely available. So demand is increasing and we all know what that means. The increasing demand for a limited raw material makes it scarce, which automatically leads to an increase in value. Especially with bitcoin, because it cannot be added free of charge. The total supply is fixed, and the growth of the issue is slowing down.
This is a basic economic principle.
Stock to flow
To further sharpen your expectation of 2021, you can also look at the stock to flow (SF) model. Many bitcoin investors swear by this. This model comes from a Dutchman who calls himself Plan B on Twitter.
In short this amounts to: how many years do you need to produce the total current stock. Gold currently has the highest SF score. The SF score of gold is 62: it takes 62 years to produce the total gold supply. At the moment bitcoin has an SF score of more than 25 and after the halving it will be at least 50.
Plan B looked at the past and made this graph based on this. The black line indicates what the value of bitcoin should be according to SF. The colored dots represent the real course.
The balls correspond unpleasantly to what the black line does. That is why investors are so confident in his model to be able to base their expectations of 2021 on.
The SF model predicts a bitcoin value in 2021 of approximately $ 75,000 ($ 83,000). So he does not predict that this will be the price of bitcoin, but that bitcoin should be worth this amount based on Stock to flow.
Other developments to keep an eye on
In 2019, a few major developments have been important for the price of bitcoin. You can expect that in 2021. Keep an eye out for the following developments:
Trading volume at Bakkt: this trading platform for institutions was introduced in mid-2019. After a slow start, the daily trading volume is about 1000 bitcoin. And there is an upward trend. On Bakkt, large parties can go long and short, unlike their competitor CME, here you have to pay with bitcoin.
- CBDC: more and more countries and their central banks are engaged in a Central Bank Digital Currency, or a national crypto currency. All world powers are working on it and China seems to be the first to have its currency ready. The adoption of CBDCs is increasing the focus on blockchain and bitcoin. So China is already working on its own currency and the moment President Xi said that blockchain has potential, the bitcoin price rose by 40%. We now have to wait for a response from the US and Europe.
- Libra: it is not just about libra, but about all coins issued by large companies. Whether Libra will or will not matter no longer matters. Due to the commotion and the bad arguments why there should / should not be a libra, even American politics refer to bitcoin. Libra ensures that independence and the decentralized nature of bitcoin are emphasized in the media.
- Trade and Currency Wars: Expect a resort to gold and bitcoin, because everyone wants to keep the value of their money. 2019 will go down as the year when Trump's international political relations got sidetracked. In his first / only term he placed many import tariffs on products from China and Europe. The counter reaction from both China and Europe was predictable: tariffs. This eventually led to a race that is not over yet: who has the weakest coin. Because a weaker currency leads to more exports. Citizens and companies are ultimately the victims of this because your currency is worth less.
- Macroeconomics: keep an eye on the financial news, not just the bitcoin price. Everything is connected. Look at the bond market, the stock market, the housing market and the interest rates of the savings accounts. As these markets become less attractive, resorting to bitcoin returns is an interesting alternative.
So what will it be?
As you may have already understood, it is not easy to summarize the expectations of bitcoin in 2021 in one amount. There are many factors that you must all weigh.
Do not see this article as buying advice, and do not rely solely on our research. Use the factors we have described as a guide for your own research.