Why 2021 will be the best bitcoin year yet

Why 2021 will be the best bitcoin year yet

Bitcoin has had an explosive breakthrough year as a mature financial asset. The cryptocurrency is finally being considered by institutional investors for the first time in a year that will go down in history for unprecedented money printing.

The asset’s hard-coded digital scarcity is a primary driver of its boom and bust cycles, and in the year of Bitcoin Millionaire after each block reward halves, magic happens. With the new year just around the corner, here’s a look back at past crypto market cycles to get a glimpse of what to expect from Bitcoin in 2021.

A look back at historical Bitcoin market cycles

All markets are cyclical and go through different phases of bear and bull trends. These cycles can span decades or a handful of years.

With cryptocurrencies, cycles often move faster than with traditional assets because the market is active around the clock. But since Bitcoin is only a little over a decade old, there are only a few boom and bust cycles from which to read useful data.

Technically, a new bull market starts when Bitcoin breaks through its previous all-time high.

Basically, this happens every four years after the asset’s block rewards are halved. This built-in mechanism halves the supply of BTC at a time when demand begins to rise again.

The combined effect of suddenly reduced supply and rising demand upsets the balance of buying and selling so much that the price rises exponentially.

The year 2020 was an ideal example of the impact each halving can have on the market. Bitcoin went from a „fad“ to a full-blown FOMO in less than nine months – all because supply and demand are so conducive to a positive return.

And while 2020 was definitely a breakout year for a bullish Bitcoin, it is the next year that will create a new wave of Bitcoin billionaires.

Why 2021 will be the best year for bitcoin

Looking at the chart above, it’s shocking how high Bitcoin has climbed in twelve years. In the twelve years, the cryptocurrency has seen three significant halves, with the reward miners receive being cut from 50 to 25 BTC, then from 25 to 12.5 BTC, and finally to the current 6.25 BTC.

Each time this happens, demand begins to outweigh limited supply so dramatically that the asset value rises parabolically and increases exponentially.

In the two recorded years after halving, the first resulted in a return of well over 6,000% and the second in a return of just under 2,000%. What could 2021 bring to crypto investors?

Another 2,000-6,000% return is not likely, simply due to the law of diminishing returns, however even a 400% increase from current levels would result in a price of $125,000 per BTC.