The cryptocurrency markets are once again in full throttle, as investors from all backgrounds purchase Bitcoin. Why is this suddenly happening? The reasons are many but two are most prevalent. 

First, we have seen market cycles “rhyme” over Bitcoin’s lifetime, and we are currently entering what history labels as a bullish period. Prices rise and should continue rising throughout the year.

The second reason however is what will massively accelerate the standardization and dominance of the crypto markets – COVID19. Ever since the lockdown measures were introduced to the public, we have seen massive amounts of money-printing as a form of bailout measure to support those who can’t work at the moment. An excess of 10 trillion dollars has been printed on a global scale in less than one year.

All this leads to a more mature cryptocurrency market – one that could accelerate the pace of mainstream adoption.

Why 2020 set the new standard for the crypto markets

2020 was one of the most interesting years in the cryptocurrency space. In a short period of time, we saw Bitcoin crashing to nearly $4000, only to grow back to $28.000 a few months afterward.

All this was the result of the Bitcoin halving in combination with the economic difficulties our world is facing at the moment. Those who remember the 2008 crisis can easily see the long-term implications of the lockdown measures we are currently called to abide to.

All this has given rise to large bailout packages, a near-certain double-digit annual inflation rate for the next few years, and negative interest rates on bank accounts.

As expected, experienced investors and corporations started to allocate their capital into safe-haven assets. Gold’s price started growing and so did the price of Bitcoin. We saw public companies like MicroStrategy, and Square invest (part of) their cash reserves in Bitcoin and profiting massively from it.

We also saw payment apps with massive userbases like Paypal and CashApp enable cryptocurrency purchases, which further exposed the industry to retail investors.

But most importantly, we saw that even though all these difficulties, the market managed to survive and thrive, despite the futile efforts of governments and central banks to propagandize the use of Bitcoin and closing customer accounts involved with crypto purchases. 

2021 will accelerate the market’s growth even further

The first month of 2021 has already been quite eventful for the crypto industry. We saw Bitcoin grow over 30% YTD only to crash more than $10,000 shortly after. The volatility is massive but so is the interest from the public.

Yet, more importantly, we saw a republican party win the US elections. President-elect Joe Biden has already agreed to an additional (two-pronged) $1.9 Trillion stimulus package which should go into full effect the moment he takes the presidency. Looking at the plans of the newly formed US government and the speed with which vaccines are distributed on a global scale, we doubt that this will be the final stimulus package within 2021.

All this leads to further interest in safe-haven assets and more importantly those that experience rapid growth in value. Bitcoin meets these criteria, which is why we expect to see rapid growth in the bitcoin price over the next few months.

The markets believe so as well

Other less popular news indicates that a Bitcoin supply shortage is coming. More specifically, cryptocurrency exchange eToro announced that it will soon run out of Bitcoin to sell, as there is far more demand than there is supply in the markets. 

But this is not unexpected either. Over the past few months, we have seen large sums of BTC leaving exchanges and being sent to self-hosted wallets. The decrease of exchange-stored BTC is parallel to the growth in the value of Bitcoin:

Bitcoin balances on centralized exchanges. (Image: Glassnode)

How to prepare accordingly

We cannot provide investment advice as we are not qualified to do so. However, what we can urge you to do is perform your own research. As the global economy continues its downward spiral it is important that you understand how to best protect yourself. 

Make sure you follow relevant hashtags related to Bitcoin on discussion platforms like Twitter and consume as much information from industry experts as you possibly can. Consider checking the following resources:

Once you have conducted sufficient research and you feel ready to invest, you can choose which investment method suits you best. Overall, there are two popular ways to go about it:

  • Buying a significant amount of Bitcoin at market (spot) price, which can be done by individuals with sufficient savings or corporations who wish to allocate their cash reserves.
  • Dollar Cost Averaging (DCA) into Bitcoin – buying small amounts of BTC on repeating timeframes over longer periods of time.