When bitcoin plunged below $5,000 during the COVID meltdown, not many imagined it would soon hit $30,000. The market is more robust than ever in spite of regulatory attacks on various fronts, notably the Treasury’s proposed requirements for unhosted wallets and the SEC’s lawsuit against Ripple.
Bitcoin adoption by traditional financial institutions surged during 2020. According to Valhil Capital founder Jimmy Vallee, the price of bitcoin will soar in 2021 as more big funds opt for large investments in the digital token. “Institutional investments will help stabilize the cryptocurrency market, not just the bitcoin market. Any digital currency that seems reliable and attractive to large investors will also contribute to driving the trend. Growth and increased stability will likely dominate the market in the coming year.”
Fundstrat's Tom Lee agrees with Vallee."2021 is going to be a lot like 2017, which means bitcoin should do even better in 2021 than it did in 2020,” Lee comments, “so [the price of bitcoin will increase] something above 300%." Lee has predicted a “parabolic rise,” arguing that 2021 will be like 2017 in that both followed a year of halvening. Estimates from different crypto gurus place bitcoin’s 2021 peak between $60,000 and $100,000.
Regulatory de-risking is also expected as Joe Biden prepares for his inauguration, and this could also be a significant driver for more institutional buying and retail-related investments.
The First Bitcoin ETF?
A bitcoin exchange-trade fund (ETF) currently seeking regulatory approval, the VanEck bitcoin Trust, could also contribute to the cryptocurrency’s projected price surge in 2021. Created by top ETF player VanEck, the bitcoin futures ETF is set to hold physical bitcoin. If approved by the SEC, the new ETF could significantly impact the industry as a whole. By holding bitcoin and valuing its shares based on prices contributed by the top crypto exchanges, VanEck’s ETF could greatly expand the universe of bitcoin investors.
The SEC has been reluctant to approve crypto ETFs in the past, arguing that they pose fraud risks. It remains to be seen who will head Biden’s SEC and their standing on bitcoin ETFs. While Biden has given signs he is more crypto-friendly than Trump, VanEck should be nonetheless cautious. The president-elect’s nominee for Treasury Secretary, Janet Yellen, has previously described bitcoin as an unstable, “highly speculative” asset.
One of the main drivers for bitcoin pricing in 2021 will be investment from big funds. MassMutual’s recent $100 million investment in bitcoin and increasing purchases by Paypal are clear steps in that direction. “In this very favorable scenario, an SEC approval of a bitcoin ETF could catalyze the definitive mainstream adoption of cryptocurrency. Whether it happens in 2021 or not, it is only a matter of time,” Jimmy Vallee comments. “Regulators can no longer oppose cryptocurrency, and if they continue to put hurdles on innovation, they will become obsolete themselves. Next year will be stellar for bitcoin and other top cryptocurrencies, no matter who heads the SEC.”