Danny Scott is the co-founder and CEO of CoinCorner, one of the UK's leading Bitcoin exchanges that was established in 2014 with the aim of making Bitcoin accessible to UK customers. A software developer turned entrepreneur, Danny has been involved in Bitcoin since 2011.
As we come to the end of what has been an iconic year for Bitcoin, I can only see more positive growth in 2021. Here's why.
Living and breathing this extremely fast-paced industry and soaking up global bullish news daily means that I’ve forgotten more good news from this week alone than Bitcoin experienced over years back in its early days.
Here are a few of the reasons why I’m incredibly bullish on Bitcoin for 2021.
Starting simply, Bitcoin is finite, and there will only ever be 21 million. Back in May, we celebrated Bitcoin’s third halving—an event that happens roughly every 4 years, halving the supply of bitcoin that comes into circulation—and this year saw it go from 12.5 to 6.25 bitcoin per block (every ten minutes or so). There are expectations for what might come after, with history telling us that the Bitcoin price will typically begin to rise significantly within the first 18 months following a halving, often simply put down to supply and demand.
While we know the supply is fixed, what about the dynamic demand? This is the part that I feel has been underestimated at each halving, including by ourselves at CoinCorner following the 2016 halving which led to the bull run of 2017. During said bull run, we were signing up a record number of registrations. But our system and processes weren’t ready for this, and we weren’t alone. Some of the larger exchanges had to freeze registrations as they couldn’t handle the throughput, while others experienced technical issues with their trading engines locking up and websites going down due to overload.
This time around, though, the industry as a whole is better prepared for the predicted 2021 bull run. It’s not perfect, but it’s better.
Compared to 2017, when demand came from the retail market (this will eventually happen again, of course), the current ask is coming from an institutional level, completely flying under the radar for many people; this looks set to continue through 2021.
Roughly 27,000 bitcoin are mined (brought into circulation) each month, and although this may sound like a lot, it’s really not. For context, Grayscale added 32,000 bitcoin to their portfolio last month alone, CashApp received $1.6 billion worth of revenue from their customers buying bitcoin in Q3 2020, and PayPal has announced that their customers will be able to buy bitcoin come 2021.
In October, Microstrategy became the first publicly traded company to add roughly 38,250 Bitcoin to their balance sheet, with Square closely following in their footsteps with a purchase of 4,709. I fully expect to see this trend continue through 2021 as more companies look for the best place to exit their fiat positions and choose Bitcoin as their inflation hedge asset.
At CoinCorner, our balance sheet (like that of many other Bitcoin companies) already contains bitcoin. This is likely to become a growing trend as inflation begins to kick in due to the current financial climate.
Companies aside, traditional investors are also beginning to make their moves. The well-respected Rauol Pal has become more and more bullish on Bitcoin this year, and his Bitcoin position has grown larger, as he mentioned recently that he was going to sell his gold to buy more bitcoin.
Two other examples are brought to us by Stan Druckenmiller and Paul Tudor Jones, two high-profile billionaires who recently opened up about their Bitcoin investments and bullish outlook on the coming years.
As others did before him, Druckenmiller compared Bitcoin to gold as an investment vehicle, stating he owns both but believes Bitcoin may outperform gold:
"I own many, many more times gold than I own Bitcoin, but, frankly, if the gold bet works, the Bitcoin bet will probably work better because it’s thinner and more illiquid and has a lot more beta to it.”
Again, this is a trend we can expect to see continuing as wealthy individuals look towards inflation hedge assets.
There are lots of price models and predictions, Stock-to-Flow (S2F) from PlanB being one of the more popular ones, all ranging in price from $50,000 to $288,000 per Bitcoin by 2021.
The chart below shows the previous halvings, with the red line indicating our current progress since the halving earlier this year. If it continues to follow the previous trends, we can expect to see the S2F model proving somewhat accurate—meaning that $288,000 may not be an unrealistic target price.
Touching briefly on the unfortunate situation the world has suffered this year, the coronavirus crisis had the knock-on effect of triggering a long-feared financial crash in March. This resulted in government bailouts: the Federal Reserve (Fed) printed $3 trillion (plus another $2 trillion on the way), the Bank of England likely printed towards £1 trillion, and many more around the world are following suit. Not to forget the introduction of negative interest rates, which now look to become the norm.
Although such measures may be necessary in the eyes of monetary policymakers to stimulate the economy and its future protection, it comes at the risk of inflation on a scale unseen in these territories.
Putting it into perspective, the Fed printed $3.9 trillion between 2008 and 2014, including the 2008 financial crisis. They have already surpassed this mark within the last seven months alone, with more likely to come.
Where there is financial uncertainty, people look for a safe haven. Bitcoin is becoming this safe haven.
61.71% of all bitcoin in circulation hasn’t moved within the last 12 months. Bitcoin investors have stomached sharp drops greater than 50% this year and still didn’t sell. Bitcoin’s sitting comfortably in the upper $18,000's right now, and still those coins aren’t moving. Bitcoin investors are here for the long-term. They have strong hands and are preparing for the next twenty-fold growth.
This bitcoiner crowd also continues to accumulate and hodl more every day, leaving less liquidity available for newcomers. In turn, this will drive the price higher. Once Bitcoin pushes past the $20,000 previous all-time high and starts hitting mainstream media again, retail investors will enter just as they did in 2017, but this time with the backing of public global companies, billionaires and hedge funds.
A quick look at Google's trends for the search term “Bitcoin” shows that interest today isn’t anywhere close to that of 2017, sitting at only 13 percent. Yet, the Bitcoin price is closing in on its previous all-time high and looks likely to break through $20,000 before the interest spikes again.
Search trends during the 2017 bull run exceeded those of 2013 multiple times; I therefore fully expect the 2021 bull run to peak “Bitcoin” interest in excess of five, maybe towards fifteen times of what we saw in 2017.
Numbers sometimes speak louder than words.
The below chart shows a comparison of Bitcoin's performance versus that of gold and the S&P 500 over the past five years. The trend looks similar for the seven years prior to that.
If Bitcoin's halving history is anything to go by, the year following a halving (as seen in 2012 and 2016) usually sees an incredible price increase, before recording a negative year after that (as seen in 2014 and 2018).
The industry has been challenged by a lot of negativity over the years, but as time has passed, its reputation and surrounding sentiment have grown stronger.
At what point do we call it a success? 10 years? 20 years? What if it fails in 70 years' time? Would that make Bitcoin a failure? No, it would mean that it’s had its time and something better has surfaced.
Personally, I’ve gone past the stage of treating Bitcoin like an experiment, or wondering when it will be considered a success—I already see Bitcoin as a success.
The Bitcoin community is continuing to build a decentralized monetary future, and what we're seeing today is only the beginning.