How High Will Bitcoin Go In 2021 & Beyond?

Key Points

· This forecast, supported by both technical and fundamental analysis, projects that Bitcoin will reach an intraday high of $295,911 in 2021 and will close the year at $208,926.

· From a fundamental analysis perspective, Bitcoin’s price will continue to see upward pressure this year in part due to new stimulus measures expected from the Biden administration in 2021, resulting in further weakening of the US Dollar.

· In terms of technical analysis, we believe that Bitcoin has a 4-year market cycle with the first year being a bull market, the second year being a bear market, and the third and fourth years being recovery years to get back to the prior all-time high. This pattern has held true in Bitcoin for the past 8 years, and 2021 will be a bull market year in the market cycle.

· While 2021 will see record highs accompanied with great market enthusiasm, investors need to be prepared for the upcoming bear market in 2022, which we forecast to see price declines of 80% and a year-end 2022 price of $54,834.

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With Bitcoin passing the $20,000 level last month for the first time since December of 2017, many investors believe that we are in a new bull market in 2021, especially given that the price of Bitcoin passed the $40,000 level on January 6th. However, how high will the price of Bitcoin go in 2021 and are there some major risks to the exuberant sentiment among Bitcoin investors?

Introduction To Bitcoin & Its Fundamentals

Bitcoin is the first cryptocurrency that was launched in 2009. It is a decentralized, peer-to-peer digital currency featuring transactions that occur without the need for a financial intermediary or institution to facilitate them. Transactions are verified and publicly recorded on a virtual ledger by independent “miners”, who solve complex mathematical problems using cryptography to verify these transactions in return for a “mining” reward of newly created Bitcoin. Since Bitcoin began in 2009, many other cryptocurrencies have launched with the aim of further decentralizing transactions or eliminating intermediaries. However, Bitcoin still remains the king of cryptocurrencies and its total value currently represents 63% of the entire cryptocurrency market. Furthermore, Bitcoin is currently the psychological price leader in the market: whenever Bitcoin rises or falls substantially, the other major cryptocurrencies in the market tend to follow shortly thereafter. Lastly, the current supply of Bitcoin is slightly over 18.5 million and the most Bitcoin that there will ever be in the future is 21 million. This is in stark contrast to major fiat currencies, such as the US Dollar, that have no maximum supply and are significantly increasing their supply of currency through fiscal stimulus during the Coronavirus pandemic.

To be clear though, there has been no shortage of critics for Bitcoin since its inception. Many financial experts and economists have criticized its infamous price volatility and called it a speculative bubble, such as when Jamie Dimon called Bitcoin “a fraud” in 2017 and has since softened his stance considerably. Others have criticized it for its use in illegal transactions, its theft in centralized exchanges, and its overdependence on the large amount of electricity used by miners.

However, there are also many supporters of Bitcoin and they continue to grow in number. Of great importance in the current market is the level of institutional investment and acceptance now taking place in Bitcoin and other cryptocurrencies. Whether it is Paypal’s recent decision to allow their 350 million users to purchase Bitcoin, major investors such as Stanley Druckenmiller and Paul Tudor Jones endorsing Bitcoin, or MassMutual recently purchasing $100 million of Bitcoin, these signals all indicate fundamental support for a bull market in 2021 should institutional demand for Bitcoin continue this year. In November, a Citibank executive, Tom Fitzpatrick, even made a price target for Bitcoin as high as $318,000 this year. So how high do we believe that Bitcoin will go in 2021? First, let’s review our 2020 price forecast.

Our Last Forecast For 2020

In February of 2020, we made price forecasts for Bitcoin of $14,062.30 by the end of June and $20,089 by the end of December as evidenced by the tweet we made below:

While our forecast for June was too high with the closing price being $9,137.99, our forecast for the end of December was too low, with the price of Bitcoin at $29,374.15 by the end of 2020. While we made other forecasts for 2021 to 2023, we would now like to revise those while extending our forecast all the way out to 2025.

Our 2021 Bitcoin Price Forecast

In formulating our forecasts, we make certain assumptions about the financial market for Bitcoin. The first major assumption is that the market for Bitcoin, and in turn for the cryptocurrency market as a whole, is cyclical. To be more specific, we hypothesize that Bitcoin has a 4-year market cycle with the first year being a bull market year, followed by a bear market year and 2 subsequent recovery years to get back to the highs of the prior bull market year. We also assume that the current cycle will track the previous cycles, and thus far it clearly has:

As you can see in the chart above, the 2018 to 2020 bear market and recovery has closely tracked the 2014 to 2016 bear market and recovery in terms of price as a percentage of its prior all-time high. Even in instances where the most recent bear market and recovery (red line) has diverged significantly from the prior one (orange line), it has always converged back thus far. This can be seen in point A of the chart above when the most recent bear market and recovery (red line) significantly diverged downward from the prior one (orange line) in June 2018, only to converge back to the prior bear market and recovery at point B three months later. Likewise, this can also be seen in point C of the chart above when the most recent bear market and recovery (red line) significantly diverged upward from the prior one (orange line) in June 2019, only to converge back to the prior bear market and recovery at point D six months later. It is also important to note in the chart above that the bear market period lasted for 13 months in both of the last two market cycles, while the 2015 to 2016 recovery period lasted for 25 months and the 2019 to 2020 recovery period lasted for 22 months.

Now let’s take a look at what happens to the chart if we extend it out an additional 4 months to June, which is a total of 42 months since its prior all time high:

As you can see with the orange line in the chart above, the price of Bitcoin spiked during the first six months of 2017, rising by 157% during the first half of the year. Our forecast, represented by the green line in the chart above, has the price of Bitcoin converging back to the orange line by June of 2021, and then slipping below it for the remainder of 2021. You can also see our monthly price forecast for Bitcoin in the chart above, and our forecast for the end of June is $42,589.

So what happens to the chart if we extend it out an additional 6 months to December 2021 for a total of 48 months since its prior all time high?:

As you can see with the orange line in the chart above, the price in Bitcoin spiked even more during the last six months of 2017, rising by 471% during the second half of the year and rising 1369% during the entirety of 2017. Our forecast, represented by the green line in the chart above, has the price of Bitcoin at $208,926 by the end of 2021. Additionally, we forecast that the highest price for Bitcoin in 2021 will occur in December and max out at $295,911, which is slightly lower than the maximum price of $318,000 forecasted in 2021 by Citibank executive Tom Fitzpatrick.

Why Bitcoin Price Growth In 2021 Is Forecasted To Be Less Than 2017

You may have noticed in the previous chart that forecasted price growth in 2021 (green line) is less than the price growth seen in 2017 (orange line) during the last 7 months of the year. The reason that we are projecting a lower level of price growth for this year is because price growth in 2017 was lower than in 2013, which was the previous bull market. The following 2 charts demonstrate this, with the second chart using a logarithmic vertical axis for better readability:

As you can see in both charts above, the 2013 bull market had greater price growth than the 2017 bull market. As a result, we are forecasting a slightly lower level of price growth for next year than we saw in 2017.

So What Will Happen To The Price Of Bitcoin After 2021?

Although we predict that 2021 will see outstanding returns in Bitcoin, 2022 will likely be a horrible year for the cryptocurrency if our 4-year market cycle hypothesis holds true. We forecast that 2022 will see major price declines in Bitcoin, ending at $54,834 for the year. It is our belief that January 2023 will be the lowest month in the bear market and will close at $50,601, which represents a nearly 83% drop from its forecasted prior all time high of $295,911. We anticipate that buying Bitcoin near the end of 2022 in the low $50,000 range will be a great buying opportunity for the upcoming recovery and bull market. Our prediction is that the recovery phase of the market cycle will begin in February of 2023 and will last until the end of the following year, with the price of Bitcoin forecasted to close out 2024 at $272,120. In 2025, a new market cycle for Bitcoin will begin starting with a new bull market that will last until the end of the year. While 2025 will still see impressive returns from Bitcoin, its price growth will be less than that seen in the bull market of 2021. Our price forecasts for Bitcoin from 2021 to 2025 can be seen below:

While all of the numbers that you see in the forecast above are supportable from a technical analysis perspective, the forecast for 2025 does concern us in terms of fundamental analysis. With a year-end 2025 forecast of $2,604,017, the implied market capitalization of Bitcoin would be in the $50 trillion range, which would likely be higher than the market capitalization of the S&P 500 in 2025 since it’s current market capitalization is slightly less than $28 trillion. Such a high price in Bitcoin would not last for more than a few weeks, and a price of $1 million would likely be more sustainable since it would imply a market capitalization of around $20 trillion. Another point to consider is the total value of the broadest measure of the US money supply that the Federal Reserve actively tracks, also known as MZM or “money zero maturity”. This measurement of the money supply includes all money that is ready to spend immediately such as all bank notes and coins in circulation, as well money in all checking accounts, savings accounts, and money market funds. As you can see in the chart below from the Federal Reserve, MZM is currently at over $21.6 trillion dollars:

In 2020 alone, MZM rose by $4.6 trillion dollars or 27.1% mainly due to economic fiscal stimulus spent on the Coronavirus pandemic. It is important to note that MZM does not include money that is essentially locked up in long-term bonds or certificates of deposit, implying that the real total supply of dollars in the world is higher. There is also no maximum limit of the US money supply, whereas we know that the maximum supply of Bitcoin is 21 million, which is nearly 21% higher than its current supply of 18.5 million. At a potential price of $1 million per Bitcoin and an implied market capitalization of between $19 and $21 trillion, the total value of Bitcoin would be less than the current US money supply. It is not unreasonable to believe that MZM could be greater than $30 trillion by the end of 2025, particularly if much higher levels of fiscal spending continue due to the Coronavirus pandemic.

However, what fundamentals of Bitcoin would need to be in place to justify a valuation that is on par with the total value of the S&P 500 or the total US money supply? To us, such a valuation in Bitcoin would require widespread adoption of its use in everyday transactions that take place around the world. Furthermore, Bitcoin would likely need to be viewed as a desired medium of exchange on par with the US Dollar. Should Bitcoin be accepted by virtually all retail environments by 2025, it could also become a potential reserve currency for governments around the world to transact with internationally, which would further support a market capitalization in Bitcoin of around $19 to $21 trillion. From where we currently stand though, having such supporting fundamentals in place for Bitcoin by 2025 seems like a stretch to say the least, which is why any price prediction of over $1 million makes us a bit hesitant. In the end though, the price or value of a financial asset is determined by the collective belief of its market participants, whether rational or not.

Why Now Is A Great Time To Invest In Bitcoin

Even though Bitcoin is up over 200% since the end of November, passing its prior all-time high of $20,089 set in 2017 and then subsequently passing both the $30,000 and $40,000 price levels, the world’s first cryptocurrency still has a long way to go this year. Hopefully with this recent dramatic rise in Bitcoin that passed its prior all-time high, you are somewhat convinced that we are in a new bull market, as was the case in 2013 and 2017. The 2013 bull market saw a 5510% return in the price of Bitcoin while the 2017 bull market saw a 1369% rise in Bitcoin. So far this year, we are up nearly 33%. Even if you believe that Bitcoin will only rise 300% this year, then we should still see substantial gains this year. Furthermore, the vast majority of the large returns in Bitcoin during bull market years occurred in the last 3 months of the year, as evidenced by the charts below:

We predict that Bitcoin will the best performing asset of the year for those assets that had a value, or market capitalization, of at least $500 billion on January 1st. To be clear, if you want to potentially see returns of 700% or more this year, you really should be in Bitcoin.

However, there are some risks that should be considered even if our forecast is correct. The extreme volatility in crypto should be considered a major risk factor for the simple fact that most people become emotional when encountering large potential losses and as a result, they panic, sell, and realize the loss. Extreme volatility can occur even during the bull runs like we are seeing today, as evidenced by the 28% decline that occurred from January 9th to January 11th of this year. While a nearly 30% loss can be daunting to most market participants, that is nothing compared to the 80% or more potential loss that you can face when the bull run is over and we move into bear market territory. Therefore, it is vital to be vigilant in maintaining your price target, making adjustments to it as necessary when new information presents itself. It is also important to have a sound exit strategy that is realistic to achieve, while also sticking to the plan and executing it in an expedient manner when the time is right.

Are You New To Crypto And Unsure If You Can Correctly Time The Market Or Withstand Its Volatility? Consider Bitdollar Fund.

The cryptocurrency markets are highly volatile and new traders can easily get shaken out of the market due to extreme price declines, even in a bull market. Once the bull market eventually comes to an end, strong analysis and market timing will be key in both securing a good exit price and minimizing regrets. After the bull market of 2017, many retail investors took huge losses the following year’s bear market. An investment club like Bitdollar Fund can help navigate the extreme volatility and market cycles in cryptocurrency on a collaborative basis through regular investor meetings. If you are relatively new to cryptocurrency, joining a collaborative investment club community can be a great way to both learn from others and endure the risk of high volatility markets.

As a group, we will collectively decide when to enter and exit the market on a long-term basis by anticipating major market pivots during Bitcoin’s market cycle. We believe that we will be able to exit our Bitcoin positions at around $250,000 this year, likely in November or December. From there, we believe that the market will crash by 80% in 2022, and we will advocate shorting Bitcoin futures to the community once there are clear technical signals that the bull run is over.

Our Vision For Bitdollar

Simply put, we aspire for Bitdollar to be the first cryptocurrency that rises in price during both bull and bear markets, and we anticipate that Bitdollar will outperform Bitcoin in the long-run if we are able to profit during bear markets by shorting Bitcoin futures. We will achieve this vision through substantive discussion and debate within our investment club community, and we believe that we will be able to make stronger allocation decisions with less bias compared to a single professional portfolio manager. This discussion and debate will be incentivized with our secondary token Crypto Pro (CPRO), allowing its holders to stake part of Bitdollar Fund’s management and performance fees, which are paid in Ether:

By financially incentivizing contributions to our community with CPRO while having a sound process to debate our individual beliefs regarding cryptocurrencies, we believe that we will collectively be able to make informed and unbiased allocation decisions in order for superior returns to be achieved. We not only want to be the main destination for people new to crypto by offering relative safety and learning opportunities, but we also aspire to have some of crypto’s brightest analysts contribute their best ideas to our community, and be nicely compensated for doing so.

How To Participate If You Are From The United States:

If you are from the United States and know one of our founders personally, please feel free to reach out to one of us if you would like to invest with us in our private United States based investment club. Per guidance for investment clubs from the Security and Exchange Commission, we can only have up to 100 non-accredited US investors so investment minimums may apply. Additionally, all non-accredited US investors will be required to participate with the investment club on a regular basis and no passive investors will be permitted per SEC rules. At a minimum, all non-accredited US investors will be required to vote in allocation decisions and not voting will result in the return of the member’s funds and expulsion from the investment club.

All funds from our members will be pooled into one master account with Gemini (gemini.com), the second largest cryptocurrency exchange in the United States. Additionally, each member will be given a subaccount that will enable them to conveniently access their individual balance through the Gemini mobile app 24 hours a day, 7 days a week. To be clear, the US based investment club will not be tokenized and there will be no fees assessed other than those that originate from Gemini. Lastly, once we are ready to have a security token offering in the United States, non-accredited US investors that are members of the US based investment club will have the contractual option to participate in the tokenized version of our investment club at a significantly reduced price. Withdrawals will be processed by request and will be completed within a single business day as long as we have your correct banking information.

How To Participate If You Are From Outside The United States*:

If you are from outside of the United States, we invite you to invest with our tokenized investment club, Bitdollar Fund. A 2% management fee and 5% performance fee will be assessed to members of our tokenized investment club, however, a significant portion of those fees will be given to holders of our secondary token Crypto Pro (CPRO). All members can earn CPRO by making contributions to the community in the form of posting content, rating content, referring investors, and voting in elections. To be clear, participation in our tokenized investment club will not be obligatory, and your invested funds will effectively be locked until we are ready to list Bitdollar on a major exchange. However, once Bitdollar is available for trading on a major exchange, you can simply sell it on the open market if you have the desire to liquidate your investment. Lastly, investors in our tokenized fund will need to invest a minimum of $1,000 US Dollars to participate in investor elections before our mobile application is released. However, after the mobile app is released, all holders of Bitdollar will be able to participate in investor elections as long as the investor has passed a KYC identity screen.

Further details regarding token pricing tiers and the number of tokens available within each tier will be released soon. If you are interested in investing in either the tokenized or non-tokenized version our investment club, please reach out to one of our founders.

Disclaimer*: Cryptocurrency investing involves significant risk of loss and is not suitable for everyone. Please do your own research or consult your investment professional before investing. Residents from the United States, Canada, the Cayman Islands, Estonia, China, Singapore, and New Zealand are not permitted to participate in our tokenized investment club at this time. We are working to accept citizens from these restricted countries during future phases of our token sale in 2022 and beyond. Additionally, all OFAC banned countries (Burundi, Central African Republic, Cuba, Crimea region of Ukraine, Iran, Iraq, Lebanon, Libya, North Korea, Republic of Congo, South Sudan, Sudan, Syria, Venezuela, and Yemen) will not be permitted to invest with Bitdollar Fund.