November 2020 demonstrates that bitcoin is no longer very responsive to political changes in the world, but is still sensitive to economic unrest, which currently works in Bitcoin’s favor, strengthening its status as a defensive asset.
The main drivers of Bitcoin’s growth
In the fall of 2020 the main drivers of Bitcoin’s growth include the following:
- institutional interest;
- COVID-19;
- MicroStrategy and Square are investing part of their budget in BTC;
- Defi started to decline.
These facts could potentially solidify Bitcoin’s status as a distinct asset class that many are afraid to miss. Growth could also be influenced by news of interest in Bitcoin from traditional financial institutions, such as DBS, which offers a platform for trading digital assets for clients, and rumors that JP Morgan will launch a cryptocurrency storage service.
Launch of PayPal custodian crypto services with a potential reach of up to 26 million people worldwide.
The lack of alternative safe assets may have been due to recent news amid the worsening COVID-19 situation. Many European countries began to re-lockdown, raising concerns about the status of these currencies and stock markets due to potential economic downturns.
The Defi craze has begun to decline, as evidenced by large drawdowns in token prices (e.g. YFI, UNI) from their historical peaks. This can be explained by the fact that private and institutional investors have rebalanced their portfolios towards relatively less risky crypto assets such as Bitcoin.
2021 Forecast
With regard to forecasts for the next year, there is one main point to consider. The distribution of cryptocurrencies is still very low now. The higher it is, the more prerequisites for growth. Perhaps this growth will happen next year, and perhaps in a month, no one knows. But we can safely say that the potential and space for market growth are enormous.
If you consider the issue of investing in bitcoin, you should understand the investment horizon. The current price for a 3-5 year horizon looks reasonable as if the current price were $ 10,000 or $ 15,000. But if we talk about the investment horizon until the end of the year, then the risk/reward ratio does not look in favor of the investor, given that Bitcoin has grown by more than 40% in a month. The best advice would be to wait for the correction and buy at a lower price with a prospect in the region of $ 18,000 – $ 19,000 by the end of the year.
In 2020 large companies have decided to invest in bitcoin. Most likely, this trend will continue next year. There is also a growing number of small investors who prefer to buy bitcoin over other cryptocurrencies. They find and use different cryptocurrency converters, like bitcoin to electroneum converter or some others.
Altcoin trade
Trading with top altcoins looks effective now. First, traditionally, there is a certain cyclicality in the cryptocurrency market, when a decrease in the dominance of bitcoin in the total market capitalization is accompanied by an increase in altcoin capitalization, and the likelihood of a bitcoin correction looks very realistic in the near future. Accordingly, the top liquid altcoins are already showing good growth, catching up with the pace of bitcoin. Investments in altcoins are also supported by the fact that their current prices are not yet at their annual maximums and there is a significant growth potential by the end of the year.
