# Should I Buy Bitcoin in 2021?
Bitcoin is about 11 years old now and it has become a very popular asset to invest in through the years.
Bitcoin is so much in the mainstream market that the biggest companies and the richest people pump billions of dollars into it, as well as millions of small individual investors buy Bitcoin to increase their income.
It is important to know that Bitcoin is a very volatile asset and its price fluctuations can be as big as 40% — up or down — in a day. This can lead to big wins or losses. Bitcoin is entirely digital and super easy to invest in. Investing can be done with a smartphone while the minimum investing amount is as little as $10. Bitcoin is also decentralized and is not controlled by a bank or company that can change things around — Bitcoin is very much an asset for the people.
So, should you invest in Bitcoin in 2021?
# What is Bitcoin?
Bitcoin is a peer-to-peer electronic cash system created to work like digital cash that is not controlled by banks. However, as the asset came into the mainstream, it has changed its designation to be somewhat more like a digital gold than a digital cash. Bitcoin has all the hallmarks of an asset that can grow in value as it is anti-inflationary, scarce, and in demand. Bitcoin is based on blockchain technology that currently greatly impacts the world. All of these factors made Bitcoin go from being worth less than one cent to booming to over $60,000 per coin.
# How's Bitcoin Performed?
Bitcoin popularity has a lot to do with its price movements. The asset has shown itself to have the best performance of the last decade. The coin has reached $60,000 price point, while less than a year before it was valued around $3,000.
The price chart shows how incredibly well the coin has performed. Also the price looks like it might be topping out and that a big fall in price could be around the corner. While the parabolic movement of the coin might necessitate a correction soon — there is a lot in favor of Bitcoin’s price continuing to rise today, and into 2021.
# Should You Invest in Bitcoin Today?
Every investor wants to know when exactly is the best time to invest in Bitcoin. It is safe to say that Bitcoin is generally a good investment at the moment because of the growing levels of excitement and adoption around the coin.
For example, the CEO of the massive computer corporation MicroStrategy has been constantly buying up millions of dollars worth of Bitcoin since the latter part of 2020. Even most recently, CEO Michael Saylor bought another large chunk of Bitcoin as a part of his company’s investment strategy. Many other big investors, as well as celebrities also invest in Bitcoin — none bigger than the richest person Elon Musk. Musk believes that Bitcoin is not only a good investment now, but that it has a big role in the future of money and investing.
# Risks and Rewards
It is easy to throw money into Bitcoin now and hope for big returns but like with any investing, it is important to understand the involved risks and rewards.
Bitcoin is extremely volatile, which makes it difficult for some investors to handle. While it has seen an impressive upward trend over the past several months, nobody knows how long that will last. The cryptocurrency has experienced wild price fluctuations in the past, sometimes losing up to 80% of its value. Between 2017 and 2019, for instance, Bitcoin jumped from around $1,000 to more than $17,000, before it plummeted back to around $3,000.
# Bitcoin Potential
With all the risk, Bitcoin has a lot of potential for investors. It offers more than other assets can not attempt to match. The last decade shows that as the price went from being valued at $1 in February of 2011 to being worth $55,000 10 years later.
Danny Cox, from the financial services company Hargreaves Lansdown, says: “Cryptocurrencies could remain niche, become mainstream, vanish without trace or anything in between, and any investment should be considered as very high risk.”
Mark Hipperson, chief executive of Crypto platform Ziglu, also argues the case for digital coins going mainstream. “With more and more big brands such as Tesla and Starbucks accepting crypto, [Starbucks is testing a way to let users of its mobile app pay for coffee and food with the cryptocurrency Bakkt Cash, for example] there now seems to be little doubt that one day soon crypto will be accepted at as many places as traditional currencies.”
# Wall Street Goes Crypto
Bitcoin was the best performing asset class of 2020. As the chart below shows — gold and equities were crushed in comparison.
Bitcoin performance has not escaped the notice of Wall Street analysts and investors. In August 2020, business analytics firm MicroStrategy announced that the company invested $250 million in Bitcoin, purchasing 21,454 Bitcoin as part of a capital allocation strategy. Since August 2020 the company has increased its total investment in Bitcoin to $1.145 billion.
MicroStrategy CEO Michael Saylor said "This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy."
Following MicroStrategy's lead, in October 2020 payment platform Square announced that it had invested $50 million in Bitcoin, buying a total of 4,709 Bitcoins. Square said the investment represents about 1 percent of its total assets. Square said it was making the purchase because “Bitcoin has the potential to be a more ubiquitous currency in the future and an instrument of economic empowerment that provides a way for the world to participate in a global monetary system.”
Tesla revealed that it had piled into Bitcoin in early February when it had purchased $1.5 billion in Bitcoin as part of its corporate treasury strategy. The filing said that Tesla made the buy so the company could have “more flexibility to further diversify and maximize returns on our cash.”
Last December news headlines suggested that a senior analyst at U.S. financial giant Citibank has an extremely bullish target price for Bitcoin. Thomas Fitzpatrick, head of CitiFXTechnicals market insights wrote a report for Citibank’s institutional clients. The report says there are marked similarities between the 1970s gold market and Bitcoin today.
The whole existence of Bitcoin has been characterized by major price swings, “exactly the kind of thing that sustains a long-term trend,” said Fitzpatrick - who included a Bitcoin chart and used technical analysis (TA) of prior highs and lows to determine a target Bitcoin price of $318,000 by December 2021.
"A decoupling of gold from fiat currencies, the COVID-19 pandemic and the desire for central banks to pursue aggressive quantitative easing policies could lead to future explosive price growth in Bitcoin" said Fitzpatrick.
Whether or not this price target is realistic is unknown, but the fact that this kind of bullish analysis is being presented to Wall Street investors is bullish in itself.
# Are There Any Less Risky Ways to Invest in Bitcoin?
Investing in bitcoin is a one-way road in terms of potential, and due to the high level of volatility in the market, there are times when your investments will drain money and result in big losses. However, trading gives you a lot more control over your assets as you can react to the market and avoid losses before they become a problem. Trading also offers a variety of tools and strategies, such as shorting, that allows to make profits regardless of the movement of the market. Shorting lets you bet against the market and actually make money if the price goes down — this means there is less risk of losing money in a general market fall. Copy trading is also another really effective way to reduce risks when investing in bitcoin. Like trading itself, copy trading allows you to select a successful, skilled and experienced trader and copy his trades to make money from your initial investment. Copy trading is a good solution for novice traders as the hard work is done by professionals who are interested in making money for themselves. You can trade Bitcoin and other crypto assets at TIDEX Exchange (opens new window).
# What will the price of Bitcoin be in 2021?
It is hard to say what the price of Bitcoin will be at any given time, but predicting does become easier on smaller time periods. Many people feel that the price of Bitcoin, despite being so high currently, can grow to be as high as $100,000 by the end of the year.
# Should I Invest in Bitcoin?
There are many reasons to invest in Bitcoin, but it very much depends on your personal appetite and experience. Bitcoin is simple and cheap to invest in to start, and it is worth at least testing out the waters.
# What is the best way to get profit with Bitcoin?
Bitcoin can be simply bought and held onto as a way of investing and profiting, but it is not the most effective way. Trading offers a lot more control and profit, especially if you incorporate leverage and copy trading into your strategy. You can also buy Bitcoin and stake it to start getting passive income.