As we are moving closer to 2021, there is a lot of excitement around cryptocurrencies among investors. Moreover, crypto investors have always been inclined towards Bitcoin. As Bitcoin is moving up to $19,000 this November, it’s expected to cross the all-time-high in the coming days. Additionally, experts say that it will cross the $1 million mark.
However, will Bitcoin remain stable in 2021? Well, there are several affinities that influence the stability of Bitcoin. We will discuss every factor, but before that, let’s know how stable is Bitcoin today?
How Stable Is Bitcoin Today?
After the pandemic, the Bitcoin price is steadily rising up and reached the $19,000 level this November. But the daily volatility still remains at 3.5%, which is way above any other currencies or assets. Usually, most of the fiat currencies have volatility between 0.5% to a maximum of 1%. It shows that Bitcoin is still not stable, but it’s uncertain to say whether it will become stable next year.
Why Is It Volatile?
The Bitcoin is volatile because it performs on the FOMO effect. Apart from the FOMO effect in the crypto space, news, tax treatment, lack of regulations, and some other reasons cause volatility.
As Bitcoin has remained volatile from the beginning, news plays an important role in this. If there is good news, people start investing more in it, and the price goes up. Similarly, people get scared when there is negative news.
Recently, the PayPal announcement has a positive impact on the price of Bitcoin. Again, this year the market capitalization of Bitcoin has also crossed the all-time-high. Also, there are several updates on the internet about Bitcoin expected to cross its record in a few days. So, the price may rise, but there is no certainty about its stability.
2. Tax Treatment
The tax treatment of Bitcoin varies across the globe. Different countries treat it differently, and it has a major impact on the volatility. Even though the US government has announced special tax regulations recently, it may change as Joe Biden has been elected as the new president of the United States.
3. Lack of Regulation
Another major factor that causes instability in Bitcoin’s price is the lack of regulation. Financial leaders, bankers, and lawmakers are still not satisfied with the way Bitcoin operates. Even though they didn’t reject the whole concept, they want more strict regulations. Again, a positive response from banks drives the price higher.
4. High Number of Crypto Exchanges
The crypto industry provides the freedom to every individual that anyone can create their own crypto exchange. As a result, many people create a crypto exchange that does not have proper regulatory compliance and enough trading volume on their platform. Along with that, price manipulation is a major impact on price volatility.
5. Price Manipulation
Last but not least, price manipulation also occurs in the crypto space. If you will go through the past data, you will find traces of price manipulation. This kind activity is done by people who are veterans of the Crypto trading industry, and use the price manipulation trick to enter the market at an optimal point.
All of the above reasons are fluctuating the price of Bitcoin. Regardless of the instability, many people are interested in it as crypto experts predict that Bitcoin will cross the $1 million mark.
Moreover, Citibank’s prediction has attracted more and more people to invest in Bitcoin. Tom Fitzpatrick, a Citibank executive, expects the price of Bitcoin by the end of 2021 will reach $318K. As a result, many crypto investors are investing in Bitcoin through the open bitcoin evolution account.
The Bottom Line
Looking at different aspects, it’s not clear to say that Bitcoin will be stable next year. Although there is so much excitement for the next Bitcoin revolution in 2021, it’s hard to say about its stability.