Bitcoin Price forecast for 2021 is driven by some underlying fundamentals in regulation and the mechanics of bitcoins mining algorithm.
2021 is an important year for Bitcoin and a lot is sure to happen. One of the most important events is the long-awaited halving of the Bitcoin blocks, the so-called block halving, which has taken place in May 2020. It is almost certain that the halving will have an impact on the Bitcoin price. With these and other upcoming events in mind, 2020 could be the year when all records are broken.
Bitcoin Block Halving
Bitcoin does not come to the market without limits. A total of 21 million Bitcoin will be put into circulation. To be precise, there are actually a little less, because there will be exactly 20,999,999.9769 Bitcoin. These are brought to the market through mining. These Bitcoin are released at a predictable rate through block rewards from the so-called miners.
The reward for the miners is halved every 210,000 blocks. Since a block is created roughly every ten minutes, it takes about four years for 210,000 blocks to be added.
Initially, the miners received 50 Bitcoin per mined block, four years later it was 25 Bitcoin and currently one miner receives 12.5 Bitcoin per block. Now after the Bitcoin blocks are halved again, the reward will be only 6.25
In this way, fewer and fewer new Bitcoin come onto the market and there is a controlled and predictable deflation. The demand for bitcoin is expected to continue to grow, but the supply cannot grow proportionally.
If demand exceeds supply after halving, the price of bitcoin could go up. However, one should keep in mind that Bitcoin is relatively new and the crypto market does not always behave as we are used to from traditional financial markets.
It’s also interesting to take a look at previous block bisections. Some investors believe the halving will have a direct impact on price.
In 2012, for example, the first halving took place. A year later, Bitcoin hit an all-time high. The same thing happened in 2017, a year after halving 2016.
How is that possible? Currently 1,800 Bitcoin are created every day through mining. The vast majority of these coins are sold directly by the miners, for example to cover energy costs. When the reward is cut in half, the pressure to sell decreases. This could have a positive impact on the price.
Institutional investors and the Bitcoin price forecast
Since 2016, the million dollar question has been: Are institutional parties allowed to offer Bitcoin?
The institutional parties themselves cannot be blamed for not having done so yet. Wall Street and the major Asian markets are more than enthusiastic about trading cryptocurrencies and Bitcoin-derived financial products.
In the United States, there are various obstacles such as regulation, the rigor of the SEC, or a BitLicense. Any company that wants to trade crypto in New York (where Wall Street is located) needs a BitLicense, approval from the New York State Department of Financial Services. It is not easy to get such a license.
The job of the SEC is to evaluate and approve or deny applications from institutional parties such as ETFs. This process has been delayed significantly as the SEC can postpone its decision several times. This also happened with previous inquiries. Three important applications are currently being examined. The SEC is expected to make a decision on these before the end of 2020.
If these are approved, a lot of money will be pouring into the crypto market from large investors and that could drive the price up.
All in all, 2020 will be an important year for Bitcoin price development. After some sharp price losses in 2018, the price rose again in 2019. 2020 is looking to become a great great year?