If we look closely at the share market today, it’s increasingly clear to anyone who researches, that the gap between the economy and the market continues to widen worryingly.
However, while the COVID-19 crisis is increasingly becoming more catastrophic in the US, the stock market has closed the second quarter of 2020 with its best performance in over 20 years.
As the Coronavirus continues to hammer the global economy, share markets are booming and fund managers are struggling to find a home for all the cash, so is this a good omen for investing in Bitcoin in 2021, and is Bitcoin still a thing?
Let’s find out from this 2021 bitcoin guide. As an appetizer, just recently in this interesting bitcoin related video, Michael Saylor, CEO of MicroStrategy made a bold move, by moving his company’s $425m to bitcoin.
Let’s start by looking at the takeaway before we delve a little deeper as to whether bitcoin will continue to be a good investment in the coming year.
Is bitcoin still a thing in 2021? The stock market crash of 2020, left many investments struggling, bitcoin is a hedge against the mainstream economy where fed inflated stocks holding less value, and more and more money is being put into traditional stocks and bonds via Quantitative Easing. 2021 looks set to see bitcoin values rise.
Ok, so now we’ve nailed the brief, let’s look into how trading has developed during this unprecedented year, so we can understand a little more easily, if bitcoin is still a thing in 2021 and whether it can help you with your goal of financial freedom.
March stock market crash
For those who were looking to start their own online business venture in this unparalleled year, the clouds did indeed look dark as March 2020 saw one of the most dramatic stock market crashes in history.
According to experts, In only four trading days, the Dow Jones Industrial Average or DJIA, dropped a massive 6,400 points, which roughly equates to a mind-blowing 26% fall.
The stock market crash of 2020 hit all industries on March 9th, with history’s largest to date plunge for the Dow Jones.
One of the sectors hit the hardest was the crude petroleum sector whose prices plummeted.
In other industries, hospitality, real estate, and entertainment sectors all endured a devastating rapid decline of equal proportions.
As an example of the financial chaos, Eldorado Resorts reported a loss of more than 60% of its value.
So you might be wondering what caused this catastrophic drop.
What caused the 2020 crash?
The crash was ultimately fuelled by the unbridled global fears concerning the spread of the coronavirus, oil price drops, and the looming possibility of another recession.
Only two other dates in U.S. history had worse one-day percentage falls.
Black Monday on October 19 1987 with a 22.61% drop, and December 12, 1914, with a 23.52% fall.
Why was there investor uncertainty?
Ever since President Donald Trump launched trade wars with China and other countries, there was a ripple of uncertainty throughout the investor community.
February 27, in a little over 2 weeks, the Dow had fallen more than 10% from its record high on February 12.
So is it possible that financial dealings managed to turn this catastrophe around?
Has the economy recovered?
Along with the dramatic drop in stocks, the Bitcoin price today has long recovered from its low in March 2020.
The Bitcoin price surged over $11,000 in July, however, the economic challenges ahead resulted in many investors wondering whether Bitcoin is a good investment right now, or had they already missed their window?
The good news is that while experts predict that the BTC price will remain volatile in the short-term, investors are encouraged to focus on its long-term outlook.
Ok, so now we know that bitcoin could help you invest in your financial freedom during 2021, let’s look below at three of the economic drivers set to nudge bitcoin into the mainstream and boost the price.
1.Recession hedging
It’s often seen during a recession, those safe-haven assets will significantly do better than other more traditional investments, as people look to sink their cash into far less volatile options.
Although Bitcoin is not yet fully a safe-haven asset like gold or silver, bitcoin is by design, a suitable hedge against the mainstream economy.
As bitcoin is totally independent of the central bank, It often does well when people lose faith in the economy and the Federal Reserve.
This goes against the confidence that was inspired by the Fed during the 2008 Great Recession.
With the interest rate currently set to hit zero, the Reserve’s balance sheet is already in the red.
So this along with the inflation of asset prices, economic contraction, and other inflationary pressures, inflationary pressure, more investors will begin to see Bitcoin as an attractive investment option, resulting in a boost to the price of Bitcoin during 2021 and beyond.
2.Artificially inflated stocks
In the past decade after the Great Recession, the US equity market enjoyed the longest growth period of 128 months.
Despite COVID-19 bringing the US economy to its knees, the stock market has been mainly propped up by the Federal Reserve.
However, the recent division between stock prices and the economic reality clearly shows that stocks are currently overvalued.
Yet other experts report that the stock market has surprisingly nearly recovered to its pre-coronavirus high.
Due to the over-hiked valuations and an economy which appears to be more unstable by the day, traditional stocks currently don’t offer much in the way of a good risk-reward ratio for many investors.
As a result, more people are moving away from the more traditional equity market.
3.Monetary policies
The uncertainty, and more importantly the significant collapse of the economy has forced the Federal Reserve into a corner.
Out of sheer desperation, the Reserve has been handing out free money by buying government bonds through Quantitative Easing or more commonly referred to as QE.
To give this real perspective, after the 2008 recession, the Fed purchased over $4 trillion of assets over a six-year period. This excessive amount at the time was considered by many to be controversial.
To add to this huge amount of assets, since the pandemic started three months ago, the Fed has purchased nearly another 3 trillion dollars of assets.
If you are still in doubts perhaps the graph of the performance of Bitcoin (BTC) below will be helpful.
This time, instead of a 6 year period, it dumped nearly the same amount in just a matter of weeks.
This kind of money dumping isn’t inspiring investors in traditional stocks, but will most likely lead to a rush for bitcoins and an upsurge in their value.
Ok, so now you can see that it’s likely that bitcoin will be on your investment list in 2021, you might be wondering where you can buy bitcoin?
Bitcoin Guide: Where can I buy bitcoin?
Coinbase and Binance are two of the world’s largest bitcoin trading platforms.
They are an easy and fast way for new users to purchase various cryptocurrencies such as bitcoin.
Coinbase is one of the safest platforms to store bitcoin as it keeps almost 99% of assets in offline cold storage that can’t be accessed, so it’s virtually unhackable.
Gemini, founded by the Facebook renowned Inklevoss brothers is a digital exchange that allows customers to buy, sell, and also store cryptocurrency.
Gemini was recently awarded an operational license by the Financial Conduct Authority and is regulated by the New York State Department of Financial Services.
And finally…
We hope our Bitcoin guide has been useful to you if you are thinking about bitcoin and wondering if it’s a good investment for 2021.
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