The crypto market has been the hottest sector for traders during the past few months with some stunning gains across the board of digital coins, both big and small.
After Bitcoin again surged through the $50,000 level, this article focuses on the granddaddy of the industry, reviewing its latest performance, drivers behind its fluctuations and analysts’ Bitcoin price prediction for spring 2021 and beyond.
Crypto market overview: what has been happening so far in 2021
The cryptocurrency market has soared since the start of the year, led by strong gains in BTC. Many have been asking, “why is Bitcoin going up?” And while there were a plethora of reasons, the announcement that carmaker Tesla (TSLA) had purchased $1.5bn of the coin was one of the main drivers. Tesla is the latest company to invest in the world’s largest cryptocurrency for its balance sheet and is currently the most high-profile corporation to do so.
Big corporate interest in the market is also bringing interest from large investors and money has started to flow into altcoins once more, with coins such as Ethereum (ETH), Litecoin (LTC) and Cardano (ADA) leading the way in a broader market rally.
Will Bitcoin rise further?
In our recent guide on the top cryptocurrencies to buy in March, we shared our Bitcoin analysis and suggested buying the coin after the recent pullback. The price has now marched back above the $50,000 level to near the record high above $58,000 seen in February. Our Bitcoin price forecast sees this as a critical week for the market as it will ultimately depend on the action at the all-time high price level.
The recent selloff in Bitcoin came as investors bailed out of so-called “risk assets” after a rise in bond yields. Traders were fearful that rising inflation could drive up government borrowing costs, and BTC was dragged lower in the selling.
Bitcoin chart analysis: will the Bitcoin price go up in spring 2021?
For an accurate BTC price prediction, we can look at where the coin has traded this year.
BTC started 2021 above $35,000 before dipping to around $32,000 for support. The surge to record highs above $58,000 happened quickly after this, before last week’s dip below $47,000.
For Bitcoin’s projected value in the spring, we have to base it on the coin’s behaviour at the highs. If it can close above $58,000 then a further rally through $60,000 is possible. If it fails at that number then it could go back to the January levels around $35,000.
So, what will Bitcoin be worth after spring? The answer will depend on various factors.
The recent selling in bonds has cooled off and markets will hope that it doesn’t reappear. If it does then we could get further selling in BTC and stocks.
The US dollar also saw a rise after heavy selling last year and that would be another headwind. Markets have been able to constantly shrug off risk since the March panic lows and it is unlikely that central banks will allow markets to be rattled too much by higher bond yields.
Despite the recent move lower, there are bullish factors that should see the cryptocurrency market supported in the coming weeks and months.
Could the Tesla effect outweigh risks?
With investors worrying about asset prices again, BTC will need to see some further positive news and investment flows. That would be helped by a “Tesla effect” where corporations and large investors seek to follow the lead of Elon Musk’s innovative company and add their own weight to the sector.
Mastercard (MA) and Twitter (TWTR) were two other large companies that stated their intention to move further into cryptocurrencies following the Tesla news. Software firm MicroStrategy has also been an avid supporter of Bitcoin, in a move that reinvigorated the company’s stock price. Total Bitcoin holdings at the company are now at 90,859 coins, for an investment worth around $4-5bn based on the coin’s current value.
The recent dip in Bitcoin prices could have seen other companies using that as the perfect time to jump into the market and announcements would be seen later when they are legally obliged to notify the market regulators.
Another promising sign was the return of “whale” investors at the recent lows. Analysis conducted on March 9 showed buy orders of $100,000 and larger, were reaching all-time highs as large investors bought the latest dip.
Recent comments from ARK Investment’s Cathie Wood have also suggested that BTC could replace the bond markets, which are the largest financial market in the world. Wood has been a big investor in Tesla and her firm was one of the top-performing investment funds in 2020.
Biden stimulus is another bullish factor
Bitcoin got a recent boost after the news that the US Senate had approved the $1.9trn Biden stimulus plan. The bill now goes back to the House for amendments and the US economy could soon see large inflows to the stock market.
The last stimulus package also saw money flowing into the crypto market and a recent Deutsche Bank survey has shown that those aged 25 to 34 would put 50 per cent of their stimulus checks into stocks. Other age groups are set to put smaller levels of the payment into the markets but the stimulus bill should also be a boost for stock market sentiment after the market was boosted by last year’s package.
If the US dollar and bond yields behave, it is unlikely that BTC will face major obstacles in light of a $1.9trn flood of capital into the US economy. Some of the money is to be used to bail out struggling states and other projects, but the retail swarm of money that boosted stocks last year has led to a significant rise in new traders and Bitcoin is one of their favourite investments.
Bitcoin price prediction for spring 2021 and beyond: what to expect next
Will Bitcoin reach $60,000, or even $100,000? Some analysts’ Bitcoins predictions still think the latter is possible.
The CEO of an analytics firm Flipside Crypto recently told The Street that the price of $100,000 for BTC was inevitable.
The creator of the “stock-to-flow” model on Bitcoin, which is a closely-watched indicator, said there was potential for BTC to hit $100,000 to $288,000 by the year’s end. The model had predicted $100,000 through 2024, before a move to $1m but the latest speculative activity may speed up that trajectory.
According to the data provided by Wallet Investor, an online forecasting service, BTC is forecast to continuously trade upward, closing this year at an average of $62,907 and soar to $76,420 by the end of 2022.
If Bitcoin can trade above the highs at $58,000 this week then a move to $100,000 is certainly possible in the spring. Short positions could cut their losses, while large investors move in with the worry of missing out as they fear prices running away from them.
A more cautious approach would be to predict that the coin will punch above the recent highs into the $60,000 levels before a correction. Once the price has cooled off, then a move towards the $100,000 level later in the year could be possible.
Check out our latest video in which David Jones, chief market strategist at Capital.com, makes in-depth BTC technical analysis and suggests a short-term trading strategy for the coin:
While the crypto market is one of the hottest investment sectors right now, it still remains incredibly volatile. As such, we recommend you do as much research as possible, taking into consideration the latest market trends, expert opinion and technical analysis.
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