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Bitcoin price prediction: will it surge to $100k?

By Alexandra Pankratyeva

10:41, 18 August 2021

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In this article:
BCH/USD
Bitcoin Cash / USD
116.95 USD
5.2 +4.680%
BTC/USD
Bitcoin / USD
17250.40 USD
120.15 +0.700%
BTG/USD
Bitcoin Gold / USD
15.483 USD
0.076 +0.500%
COIN
Coinbase
47.95 USD
0.27 +0.570%
Gold
Gold
1791.27 USD
-6 -0.330%

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Bitcoin price prediction
Bitcoin / Source: Shutterstock

According to CoinMarketCap, Bitcoin started the year at just under $29,000 on 1 January 2021 and surged to its latest all-time high of $64,863 on 14 April, a huge increase of 123%. Although bitcoin (BTC) is inherently a highly volatile cryptocurrency, increased adoption rates among institutional and retail investors, together with positive analysts’ views and commentaries, make bitcoin believers ‘hodl’ (hold on for dear life). Bicoin disciples are waiting for BTC to climb even higher, despite a massive pull back of 54% to $29,600 in July 2021 and a subsequent rebound to $47,670 in August 2021.

Bitcoin trading: current price and major drivers 

Bitcoin price news 

Bitcoin skyrocketed to almost $65,000 mid-April, driven by the news that the major US bitcoin and cryptocurrency exchange Coinbase was to debut on the NASDAQ exchange, but the hype calmed down once the Coinbase IPO passed and its share price fell

Another bitcoin news-maker was Elon Musk, of electric vehicle (EV) maker Tesla. His Twitter comments helped bitcoin to reach a $1trn market capitalisation this year. The Tesla billionaire continued teasing the cryptocurrency market with the question “What does the future hodl?” 

Elon Musk’s triggered bitcoin price action

The crypto market fell quite dramatically in May, going sideways for almost three months against the backdrop of crypto bans in China. However, the range of the sideways market was very wide, from $30,000 to $42,000. 

Breaking through those levels to one side or the other would form a further medium-term trend. Going below $30,000 would have led the market to a new crypto-winter, going back above $42,000 to a recovery and continuation of the growth cycle.  

Eventually, after several pronounced attempts to push the BTC price below $29,000-$30,000, the sellers gave up and the price came out of the sideways position and moved upwards. The price reversed on 20 July 2021, trading at $29,600 to form a new bullish trend and climb back to $45,853 by 17 August 2021.

Commenting on the Bitcoin price prediction and its price targets, Capital.com’s market strategist David Jones said: 

“The recent strength in bitcoin has seen it break out of the sideways range the cryptocurrency has been stuck in since the end of May. Break-outs are normally considered positive and can suggest a new trend is starting. It is early days for the break but at the moment the next target for me would be for a run to the mid-May highs ahead of $52,000. Looking forward, I would say if it manages to hold onto the $50,000-plus area, then a run back to the all-time highs at $64,000 is the next target.” 

Bitcoin price drivers

What else is driving the bitcoin price? Common triggers to consider when trading bitcoin include:

Bitcoin price drivers

  • Supply and demand

Bitcoin price adheres to the general law of supply and demand. Bitcoin supply is often compared to gold, as there are a limited number of bitcoins that can be mined – only 21 million. The demand side here works the same as with any other asset: the more investors are willing to enter the bitcoin market, the higher the bitcoin price.
 

  • Media hype

Media hype is the most important source of influence on the price of bitcoin and other cryptocurrencies. Publicity may not increase  people’s understanding but it does drive investors’ interest. With the news – or gossip – spreading like wildfire, the BTC price can be significantly hit by the mass hysteria.

  • Growing legitimacy

The influx of institutional investors and PayPal’s adoption of the cryptocurrency lend bitcoin further legitimacy as it spreads inside the traditional financial system. According to a guidance from the US Office of the Comptroller of the Currency (OCC), national banks are allowed to use stablecoins for payments, settlements and take part in blockchain networks, contributing to further legitimisation of digital currencies.

  • Fear of missing out (FOMO)

While bitcoin’s rally in 2017 was fuelled mostly by passionate retail crypto enthusiasts, the latest bitcoin trend was sparked by public companies, including MicroStrategy and Square, investing millions of dollars in bitcoin (BTC). It opened the door to other companies viewing it as a viable reserve asset. 

MicroStrategy ignited a chain reaction, acquiring $425m worth of BTC in August 2020. Square followed with its $50m investment in October. And PayPal became the cherry on top, allowing hundreds of millions of users to buy, hold and sell bitcoins. Institutional investors, fearing they will miss out on big returns, have pumped billions of dollars into the crypto market, playing a significant role in bitcoin’s meteoric rise. 

"People are seeing a move to it as a reserve asset, knowing there's a limited supply of bitcoin, and saying, 'okay, I want my piece of it before it goes too high in price," said Jimmy Nguyen, president of the Bitcoin Association.
 
  • Demand for inflation hedge

The instability of central bank currencies boosts people’s interest in alternatives, such as bitcoin and altcoins. Bitcoin, keeping the leading position in the cryptocurrency market, has become the crypto of choice for many investors. 

The coronavirus pandemic has also contributed to positive bitcoin price predictions. As governments of many countries injected trillions of dollars into fiscal stimulus and eased monetary conditions, bitcoin rose in value as a hedge against inflation. JP Morgan analyst Nikolaos Panigirtzoglou expressed the view that bitcoin’s limited supply of 21 million and immunity from political decisions make it an attractive hedge asset as an alternative to gold.

  • Bitcoin community

Bitcoin price fluctuations may also be affected by the bitcoin community in its effort to reach consensus regarding bitcoin’s future development. The decisions influence the Bitcoin blockchain and the entire Bitcoin ecosystem. Lack of consensus can lead to a hard fork or split in a blockchain, which is how Bitcoin came to be separated into two separate blocks – Bitcoin and Bitcoin Cash – each following different rules.

According to the latest bitcoin sentiment report by sentix as of 15 August 2021, bitcoin  is enjoying the best sentiment since mid-April 2021. This big shift in opinion is related to the turnaround in the cryptocurrency market. Just a month ago the market was still bearish, now the bulls are trying to regain the old highs. However, high sentiment levels could also be a warning sign, as the market might need to take a breath before conquering the next major resistance level at $50,000 again. 

The Crypto Fear & Greed Index for bitcoin, which analyses emotions and sentiments from various sources, is at its highest level since 21 July 2020, hitting the “greed” territory. 

Crypto fear & greed index

Usually, when the bitcoin price rises, people do not want to miss the opportunity and are motivated by greed. On the other side of the coin, when the cryptocurrency’s price starts declining, investors become irrationally fearful, which could result in a BTC sell-off. 

So when the level of greed (overly bullish sentiment) is high, the market might move towards a correction. Otherwise, a high level of fear could serve as a potential buying opportunity. 

The bitcoin price has surged 57% this month, rising from $29,310 on 20 July 2021 to $47,140 on 17 August 2021, before falling back to the $45,750-mark. The price reflects a resurgence of buyers, believing it is one resistance away – at $50,000 – from another attempt to climb to the all-time high of $64,800. However, a high level of greed may indicate that a correction is under way. 

Summing up, traders sentiment looks bullish from a long-term perspective, but potential crashes may occur down the road. 

Analysts’ commentary

Since its inception in 2009, the biggest players in finance, government and business have debated whether bitcoin is the currency of the future. Bitcoin’s unprecedented surge in late 2020 made it especially difficult for naysayers to stick to their bearish views. Still, it’s always interesting to know who is hot, who is not on bitcoin today.

Commenting on bitcoin’s prospects further down the road, Capital.com’s analyst  Mikhail Karkhalev, said: 

“Bitcoin's prospects in the medium to long-term are promising. Back at the beginning of the year, I predicted bitcoin to rise to $80,000-$85,000 by the end of 2021, and even to $170,000 by the end of 2022, early 2023.”

Mikhail Karkhalev pointed out that break-out from the recent sideways trading is a good signal for the continuation of the up-cycle. He believes that bitcoin's growth potential is far from being exhausted and suggests considering the following data:

  • The first bitcoin peak in 2010 –  $0.5.

  • Second bitcoin peak in 2011 –  $32. 

  • Third bitcoin peak in 2013 –  $1,177.

  • Fourth bitcoin peak in 2017 - $19,794. 

The fifth bitcoin peak is yet to be seen. From the first to the second peak, the price has risen 64 times. From the second to the third peak – 36 times. From the third to the fourth – 17 times. Notably, each new growth cycle is about two times weaker than the previous one. 

XRP/USD

0.39 Price
+0.370% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.00311

DOGE/USD

0.10 Price
+0.870% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.0013222

BTC/USD

17,250.40 Price
+0.700% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 60.00

LUNC/USD

0.00 Price
+0.410% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee -0.0500%
Overnight fee time 22:00 (UTC)
Spread 0.00000729

Drawing some parallel, the analyst concludes that the difference between the fourth and current fifth peak will be 8-9 times, which corresponds to $170,000-$180,000 per BTC. “Considering all the above factors, it is safe to say that $30,000, $40,000 and even $50,000, which is only 1.5 to 2.5 times the 2017 peak, is not all that bitcoin is capable of today,” said Karkhalev.

Should I buy bitcoin? 

Five bulls saying “Yes”.


Hester Peirce                          

Hester Peirce

Commissioner, US Securities and Exchange Commission

“Regulators in some jurisdictions will try to curtail activity in this space, but because of its nature as a peer-to-peer technology, that’s a very difficult thing to do. It’s far wiser for regulators to spend their time thinking about allowing crypto to interact with our traditional legacy financial system. That’s a much better way for regulators then to get to know the technology and to get to know this asset class.”

21 April 2021
Source

BTC price on quote date $54,996.31


Mike Novogratz

Mike Novogratz

Chairman, Galaxy Digital Holdings

“Bitcoin is a well-thought-out, well-distributed store of value that’s lasted for 12 years and is growing in adoption”.

20 April 2021
Source

BTC price on quote date $53,906.09

 


Dan Loeb

Dan Loeb

Chief executive officer, Third Point

“It’s a real test of being intellectually open to new and controversial ideas… another conflict to overcome is the idea that being late to the crypto party will inevitably lead to one taking the sucker seat at a high-stakes poker table versus this still being early days in what is just now being adopted in the mainstream.”

March 1, 2021

Source
Price on quote date $48,856.40


Tom Lee
 

Tom Lee

Managing partner, Fundstrat Global Advisors

“It's [Bitcoin] killing it this year – it's just crushing all other hedges and asset classes this year, but in 2021 I think bitcoin could be the year of the fireworks... the best is probably yet to come.”

8 January 2021
Source

Price on quote date $40,797.61


Michael Saylor                                                                                                                   

 

Michael Saylor

Founder, MicroStrategy

”Bitcoin is the most efficient system in the history of mankind for channelling energy through time and space”.‬‬

1 October 2020

Source 

Price on quote date $10,623.33

Should I sell bitcoin? 

Two bitcoin bears who say “No” to the cryptocurrency


Gita Gopinath

Gita Gopinath

Economic counsellor, International Monetary Fund

“Bitcoin is an example of a cryptocurrency that doesn’t serve the role of money at all. It’s a very speculative investment class. In terms of substituting for what money is, I don’t think it comes close.”

21 April 2021

Source
Price on quote date $54,996.31



Tharman Shanmugaratnam

Tharman Shanmugaratnam

Chairman, Monetary Authority of Singapore

“Cryptocurrencies can be highly volatile, as their value is typically not related to any economic fundamentals. They are hence highly risky as investment products and certainly not suitable for retail investors.”

5 April 2021
Source

Price on quote date $58,799.14

Bitcoin forecasts: algorithm-based price targets

Bitcoin price predictions often differ wildly. It’s a rare occasion when numerous analytical agencies are unanimous about a bullish bitcoin’s future. 

It’s worth bearing in mind that these are computer-generated predictions that may bear little relation to what happens in real life.

  • Bitcoin forecast by Wallet Investor

Wallet Investor views bitcoin as an “awesome” long-term investment. It estimates BTC could hit $74,610 within 12 months and climb up to $182,513 in five years.

  • Future of bitcoin by Longforecast: 

Analysts from Longforecast believe that bitcoin will end up 2021 at $48,310, hit 130,870 by December 2022 and move to $117, 890 by the end of May 2025. 

  • Bitcoin prediction by Digital Coin

Digital Coin estimates bitcoin could reach $71,186 by the end of 2021, increase to $82,233 in 2022, move up to $139,517 in 2025 and hit $211,137 in 2028.

Bitcoin price prediction

  • BTC price prediction according to the Stock-to-Flow (S2F) model

The creator of a popular bitcoin prediction model Stock-to-Flow (S2F), who uses the twitter name ‘PlanB’, believes the benchmark cryptocurrency will reach $100,000 by December 2021.

The S2F model calculates the bitcoin price by looking at its decreasing supply and growing demand. As bitcoin is halved every four years, the supply is gradually diminishing and inflation is rising. In theory, this could boost demand for bitcoin and cause a drastic surge in the BTC price. 

During the second halving in July 2016, the bitcoin price was fluctuating at roughly $640. Seventeen months later bitcoin surged to a then all-time-high of just under $20,000. If the pattern repeats itself, it is possible that bitcoin could reach $100,000 by December 2021. 

Stock-to-Flow (S2F) model

However, according to the S2F model, bitcoin’s price was supposed to hit $88,531 on 20 July 2021, which was almost three times the real price on that day. Commenting on the limitations of the S2F model to Cointelegraph, Lennix Lai from OKEx cryptocurrency exchange, said:

“Despite its limited predictions, the S2F model only had limited power over the bitcoin price prediction because it assumes the production of bitcoin will be limited. While its simplicity makes the concept easier to understand, PlanB debuted the bitcoin S2F model back in 2019. Demand back in the time is a different story to now, in which demand has a direct influence on its intrinsic value.”

Big bitcoin backers and holders

Top 5 retail bitcoin investors

The Winklevoss Twins                                              

The Winklevoss Twins

Net worth: Net worth: $1.6bn each.6bn each

Cameron and Tyler Winklevoss, known as one of the first bitcoin billionaires, reportedly hold about 70,000 bitcoins according to Forbes.

Cameron: "The mainland is legacy finance, crypto is an island. We want to see an inversion where crypto becomes the mainland and legacy finance is just this dinosaur that is slowly fading away."

Tyler: "Our thesis is that bitcoin rises 30-fold from here because it is digital gold, it disrupts gold."

14 December 2020

Source
Price on quote date $19,246.64

Barry Silbert

Barry Silbert

Net worth: Net worth: $1.5bn .5bn 

The founder and CEO of Digital Currency Group. Its biggest revenue generator, Grayscale, oversees $28bn worth of bitcoin, ether and other assets. 

“Once Wall Street starts putting money into bitcoin – we're talking about hundreds of millions, billions of dollars moving in – it's going to have a pretty dramatic effect on the price.”

Tim Draper

Tim Draper

Net worth: Net worth: $1.5bn.5bn

  • In 2014, Tim Draper , the founding partner of Draper Fisher Jurvetson, bought 29,656 bitcoins confiscated by US marshals from the shuttered Silk Road black market for $18.7m, or just $632 per coin.

"I think bitcoin in 2022 or the beginning of 2023 will hit $250,000. I think the reason is that bitcoin will be the currency of choice."

24 February 2020

Source
Price on quote date $9,650.17


 

Roger Ver

Roger Ver, ‘bitcoin Jesus’

An early bitcoin investor. According to some estimates, he has gathered a collection of over 400,000 bitcoins.

“Because the supply of bitcoin is limited, the price of bitcoin is going to have to increase and increase very substantially over time. My advice is that if you're interested in bitcoin and excited by bitcoin, then buy some bitcoin and hold onto them, and you're likely to do very well over time.”

Dan Morehead

Dan Morehead

Founder of Pantera Capital, the world’s first investment focused solely on blockchain and cryptocurrencies.

“This is getting ridiculous. A year ago we predicted bitcoin hitting $62,968 this week. It just did. This bitcoin rally is EXACTLY like previous halvings. Likely to reach $115k by August [2021]”.

13 April 2021

Source
Price on quote date $63,355.02

Bitcoin historic price movement

The bitcoin price has undergone dramatic price swings since its inception.

 
   

Year

Bitcoin price performance

2009

Bitcoin goes public and BTC mining began.

2010

Bitcoin is traded for the first time on a bitcoin forum. Laszlo Hanyecz makes the first real-world bitcoin transaction, buying two pizzas for 10,000 BTC.

2011-2012

Bitcoin hits $31.9 before crashing to less than 10% of that value.

2013-2014

Bitcoin climbs to $1,200 in December before falling as low as $302, by February 2014, sparking rumours about its imminent collapse.

2014

Bitcoin price struggles. Meanwhile, Microsoft starts accepting BTC as payment.

2015-2016

Bitcoin price rebounds. It reaches $770 by the beginning of December 2016 and continues to build.

2017

Massive price spike on the wave of global interest. The BTC price surges from $1,000 to almost $20,000

2018

Bitcoin price crash. Prices tank more than 60% and end the year at $3,700.

2019

Bitcoin established itself as a widely accepted cryptocurrency. Bitcoin adoption increases. The price grows to roughly $10,000, signalling the end of the crypto winter of 2018, before falling back to end the year at $7,200.

2020-2021

The total value of all bitcoins surpasses $1trn, as the price of the cryptocurrency rockets to its all-time high of $64,863 on 14 April 2021. Growing bitcoin adoption by institutional investors, including Tesla, Square, MicroStrategy and PayPal, contribut to the bullish bitcoin price forecast for the end of the year and beyond.

Biggest BTC price swings 

Biggest BTC price swings 

Bitcoin’s history

Bitcoin (BTC) is the world’s first decentralised cryptocurrency. It was created by an individual or group using the pseudonym Satoshi Nakamoto, and it has since paved the way for many other alternative cryptocurrencies, known as ‘altcoins’.

Although the cryptocurrency was first launched in 2009, it was not until 17 March 2010 that bitcoin trade became possible, when the first exchange started operating on the now-defunct BitcoinMarket.com. 

Bitcoin runs on a blockchain, or public ledger, that uses cryptography to secure transactions, controlling the supply of additional units and corroborating transfers. Blockchains are digital databases that store cryptocurrency transactions in blocks requiring complex mathematical calculations to record and verify.

Changes in the protocol of blockchains that create a permanent split are known as ‘forks’. So-called ‘hard forks’ result in splitting a cryptocurrency to create a new currency running on a separate blockchain. In the case of bitcoin, some of the most popular hard forks happened in August 2017, creating bitcoin cash (BCH), and in October 2017, creating bitcoin gold (BTG)

In November 2018, a hard fork of bitcoin cash gave birth to bitcoin SV. All in all, bitcoin has seen nearly 100 forks throughout its history but only a handful of those could establish themselves in the robust altcoin market.

Most famous Bitcoin forks

Bitcoin trading has become controversial thanks to its wild price swings and an exuberance around its rallies that has seen investors risk all of their savings and take out large loans to bet on its value rising. With each spike and retreat in value, it generates dramatic news headlines and attracts even more investors.

Bitcoin was created with a maximum supply capped at 21 million coins. As of August 2021, there were 18.7 million BTC in circulation, representing 89% of the maximum supply. That finite supply contributes to driving up the price as an increasing number of bitcoin investors look to secure a limited number of coins. In February 2021, bitcoin hit a market capitalisation of more than $1trn. 

Bitcoin passed Tencent, Tesla and Facebook in market cap in February 2021

The success of bitcoin has prompted software developers to launch alternative cryptocurrencies that look to improve on bitcoin’s weaknesses, reduce transaction fees and create competition. In August 2021 there were more than 11,200 cryptocurrencies in circulation accroding to Coinmarketcap, although bitcoin remains the most popular, with the largest market value.

Is bitcoin a good investment? 

There are pros and cons

As with any speculative asset, bitcoin trading carries risks. The price of bitcoin has seen several painful crashes during its history but has consistently rebounded with new gains every time. As a popular trading and investment tool, bitcoin has advantages and disadvantages.

Advantages/Disadvantages of Bitcoin investments

Bitcoin: biggest influencers

                               

 

Elon Musk

Tesla's CEO Elon Musk is a strong supporter of cryptocurrencies, including bitcoin and dogecoin.

The crypto market has become extremely sensitive to what Elon Musk says on Twitter. With 55 million followers, he keeps toying with the market.

Cathie Wood

Cathie Wood is a founder and CEO of ARK Invest. She is a firm bitcoin believer and supports investors’ interest in cryptocurrencies. 

In June 2021, Cathie Wood's ARK Invest filed with the US Securities and Exchange Commission to launch a bitcoin exchange traded fund (ETF).



 

 

Satoshi Nakamoto

Satoshi Nakamoto

Mysterious bitcoin creator Satoshi Nakamoto is a man or a group of people behind the first cryptocurrency project in history. 

During the first seven months of bitcoin’s existence, Satoshi Nakamoto mined an estimated 1.1 million bitcoins at a time when each mined block brought a 50 BTC reward. 

The information on how many bitcoins were mined by Satoshi is not proved. However, the cryptocurrency researcher Sergio Lerner in his report attempted to calculate how many bitcoin blocks were mined by a single entity between 01 January 2009 and 25 January 2010. 

Lerner coined the term ‘Patoshi pattern’ to describe the pattern of blocks mined by this entity and assumed it may be Satoshi himself.

At bitcoin’s current value of $46,839, the fortune of 1.1 million bitcoins would make Satoshi the wealthiest bitcoin holder. If these bitcoins were sold, the price of the cryptocurrency would nose-dive.  


FAQs

How do I trade bitcoin at Capital.com?

Capital.com offers BTC trading via contracts for difference (CFDs) to speculate on the value of bitcoin against the US dollar and other currencies such as the British pound and the euro, as well as against other cryptocurrencies, such as Ethereum’ ether (ETH)litecoin (LTC) and cardano (ADA).

There are differences between buying a cryptocurrency and trading a CFD in the crypto market. When buying a cryptocurrency, it is stored in a digital wallet. When trading CFDs, the product is stored in your account with an online broker, which is regulated by a financial authority. 

The advantage of using CFDs to trade BTC is that you can profit from your position whether the price of the asset rises or falls. You can take a long position if you expect the price to rise, or you can open a short position if you expect the price to fall.

Looking for a reliable CFD trading provider to trade bitcoin? If so, just spend three minutes of your time to sign up and start your journey of BTC trading with Capital.com. Try our award-winning trading platform or download our mobile app, which will become your smart CFD trading assistant.

How are new bitcoins created?

Bitcoins are created by mining. Individuals or companies called miners process and complete ‘blocks’ of verified transactions using complex computer algorithms. The blocks are added to the blockchain and miners get new bitcoins as a reward. 

Mining involves solving complex computational puzzles, which require expensive equipment and a lot of electrical power. Under the bitcoin protocol, new bitcoins are produced at a predefined, gradually decreasing rate, which makes mining very competitive. The number of newly launched bitcoins is automatically halved every 210,000 blocks (approximately every four years) until all the 21 million bitcoins

are mined. It means the reward for mining new blocks is cut twice and

miners get 50% less for verifying bitcoin transactions.

Fiat vs bitcoin: how is bitcoin better than fiat currency?

Fiat and crypto currencies have two major features in common: they can be used as a store of value and as a source of payment. However, fiat currencies are backed by governmental authorities, while cryptocurrencies are powered by its underlying technology – blockchain.

Many believe that cryptocurrencies will become a viable alternative to the traditional fiat currencies. A crucial aspect of a cryptocurrency is that any person, anytime, anywhere can spend or receive it without any bank or central authority involved. As a result, they have been used by organised crime to hide and launder criminal proceeds. There have also been numerous hacks that have allowed cyber criminals to steal crypto cash from digital wallets.

Fiat currencies are affected by inflation and central banks can print more of them if needed. The number of bitcoins is limited to 21 million units, which makes them a scarce asset, like gold.

Where do I store bitcoin?

Safe cryptocurrency storage is one of the most important issues for every trader. Many cryptocurrency exchanges offer built-in ‘hot’ online wallets. They are considered more agile and reliable for exchanging transactions, but remain more vulnerable to hacking as they are connected to the Internet. 

Keeping bitcoins offline reduces the threat of cyber attacks. As a result, some bitcoin traders prefer storing their coins in cold offline wallets. They represent hardware devices, which work in conjunction with compatible software but can’t be compromised as they have no internet connection.

Many bitcoin holders use both wallet types. They keep some crypto assets for regular transactions and spending in a hot-wallet, but store the rest in a cold offline wallet for safety.  

Is there a bubble in the cryptocurrency market?

In market terminology, a ‘bubble’ is defined as being when the price of an asset far exceeds its intrinsic value. The dotcom bubble that occurred between 1995 and 2000 is a prime example, where firms in the information technology industry saw their stocks rise merely because of the market sentiment around that particular industry, irrespective of their profits or chances of succeeding. The bubble then burst in March 2000 and companies went bankrupt, making their stock worthless.

The value in most cryptocurrencies is derived from their potential; how they could be used to advance society in the future. While prices for bitcoin and other cryptocurrencies crashed in 2018, they surpassed the previous highs during the rally in 2020-2021, making larger gains for investors that held onto them over that period.

It could be that bitcoin is not overvalued, and that the bubble, if there is one, is represented by the various new cryptocurrencies that are being driven exclusively by market sentiment. Arguably, this is comparable to the dotcom era – when stocks like Amazon (AMZN) were not overvalued, but others like Pets.com, which went from IPO to liquidation in 268 days – clearly were. 

However, there has been so much hype surrounding bitcoin so far during 2021, it’s currently anybody’s guess whether it will end the year up or down from its current position.

Whether you believe the market is overheating or not, there is an option to trade crypto using CFDs to take both long and short positions.

The views expressed in this article are those of the author and do not represent investment advice. Always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money.

Bitcoin glossary of terms

Read more: BioNTech stock forecast: a boost in value from COVID-19 vaccines

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