Factors that Affected Bitcoin Price in 2020 & Analysis of 2021

Posted on May 10, 2021 in Articles, Market Movements
Factors that Affected Bitcoin Price in 2020 & Analysis of 2021
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Keeping an eye on the market is one of the most critical things any investors have to do. Since 2020, many events have affected the cryptocurrency market, such as concerns regarding capital gains tax increase from Biden policy, which caused Bitcoin prices to suffer. In the meanwhile, many factors and news have been having positive effects on Bitcoin prices. Let’s analyze influential factors in the past and see what the future holds for Bitcoin in 2021. 

Factors that influenced Bitcoin price in 2020

Going back to look at Q1-Q3 of 2020, besides COVID-19, there are many significant events in the cryptocurrency industry. Warren Buffett received his first Bitcoin at a dinner with cryptocurrency advocates, which caused the Bitcoin price to increase slightly. Also, Bitcoin Halving, which happened every four years that turned out to have almost no influence on the price this time. The first three quarters price graph looks pretty fluctuated. 

Bitcoin price chart with important events between Jan 2020 - Aug 2020
Bitcoin price chart with important events between Jan 2020 – Aug 2020

Influential factors of Bitcoin price in 2021

Bitcoin price chart with important events between Sep 2020 - Apr 2021
Bitcoin price chart with important events between Sep 2020 – Apr 2021

From the last quarter of 2020 to early 2021, many positive factors made Bitcoin prices go up. We saw more acceptance in Bitcoin and Cryptocurrency from the industry than ever before, led by some of the top companies in the world, especially in the financial sector. Here are the three most significant events.

1. Bitcoin acceptance from leading financial companies 

One of the biggest steps for cryptocurrency is when many leading financial companies announced that Bitcoin is now welcomed such as 

2. Pay for Tesla with Bitcoin 

Bitcoin price was significantly boosted when Elon Musk tweeted that you can now buy a Tesla with Bitcoin. Tesla also informed the SEC that the company had purchased Bitcoin as part of a risk management plan. 

Elon Musk Tweeted to Accept Bitcoin as a Payment for Tesla
Elon Musk Tweeted to Accept Bitcoin as a Payment for Tesla

3. Morgan Stanley recommended  Bitcoin

One of the most famous investment bankers like Morgan Stanley also recommended High Net Worth investors to invest in Bitcoin to diversify the risk in a portfolio. While Morgan Stanley has a vision for Bitcoin in the future, it stills recommend investors to only hold Bitcoin up to 2.5% of the total assets due to the nature of fluctuation. 

The current situation of the crypto market 

As of 15 April 2021, the current market capitalized for the cryptocurrency market is $2.18 Billion, close to Apple’s stock value at $2.26 Billion, higher than the stock value of giant corporations such as Amazon, Google, and Microsoft. 

The main coin that dominant the crypto market is Bitcoin, the most popular digital currency, with almost one billion dollar market capitalization which is 54% of the whole market cap. 

Total Cryptocurrency Market Capitalization Dominance Chart
Total Cryptocurrency Market Capitalization Dominance Chart

According to economics theory, the price of an asset will change depending on the market demand and supply. If everything else is the same but needs for the asset increase, then the price will go up. The same goes for higher supply means decreased price. In a simple word, Bitcoin price changes depending on how much people want to sell or buy it.  

One of the most well-known sayings of the technical analysis world is “Price discount everything.” So we could say that the Bitcoin price skyrocketing reflects more Bitcoin acceptance and more COVID-19 stimulus money by the governments injected into our system in the last year.  

At the end of the day, no one knows for sure what will happen in the future for Bitcoin. One way we can make the most profit is to always keep up with the news so you can adjust the investment strategy to respond quickly. If there’s a negative factor or unexpected event, sudden changes in demand and supply could dramatically affect prices. 

Summary of Bitcoin prices factors analysis

We could say that Bitcoin value has been increasing from more acceptance both by private and public sectors. More companies are willing to accept Bitcoin, and more investors are jumping into the game. We are excited to see what the future of Bitcoin holds. 

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