Will Bitcoin Fall Out Of Favor In Corona-Free 2021?

Is it possible that Bitcoin (which hit $28,000 overnight) would see an exit of investment in 2021 as more people get vaccinated and the world economy returns to normal? Will investors at that moment decide they’ve had enough of safe havens like gold, government bonds and Bitcoin?

In other words, was there a Bitcoin rally in 2020 because of Corona, and will the crypto market return to the hyped few of before 2020? It’s a tough question at this point that Bitcoin trades near $27,000, but given that we all remember what happened in 2017-2018, one that we have to ask.

Institutional money

Well, it would have been a fair question if Bitcoin were still a normal asset without worldwide exposure or knowledge. But given that MicroStrategy, the Paul Tudor Jones hedge fund and Square (to name but a few of those that entered in 2020) have decided to put their Bitcoin investment on their books, they are not thinking of taking that out anytime soon.

The money that institutions have thus far placed in Bitcoin are normally to be considered as long term bets. It is therefore plausible that even if the overall stock market moves into a risk-on phase as the world passes Corona, Bitcoin investment is here to stay.

This does not mean that there can’t be ups and downs in 2021 of course.

Quants and halving

Furthermore, the more institutions that invest in Bitcoin, the more the asset will be studied by quants and technical analysts. Even though most bankers and CEO’s tend to dismiss is in their marketing messages, it is important to prove to future investors why crypto is worthy of investment.

As you know, ever since it’s invention in November 2008, the token needed seven months to transition from being a market good to being a medium of exchange. At that time, it was traded for less than $1. Since yesterday, someone was willing to pay almost $28,000 for that same Bitcoin. That is a fabulous ROI (Return on Investment) for any early entrants.

You can be sure that the quants over at JP Morgan, Blackrock and Goldman Sachs have started studying Bitcoin, Ethereum, Litecoin and all others before deciding to invest.

All of them thus far have come to a similar conclusion, namely that the scarcity (only 21 million Bitcoins can be mined) and the halving principle means that Bitcoin is poised to go upwards as long as regulators allow it to continue.

Other coins which have unlimited supplies, just like fiat currency does, will have a harder time convincing investors seeking a deflation hedge.