Bitcoin is a financial asset that has taken the world by storm. Just a few years back, bitcoin and cryptocurrencies has a bad reputation. Especially within top company executives and government officials. People thought it was an economic bubble or it may be ultilize for illegal/criminal activities. Then, in 2021, the price of Bitcoin started increasing. This lades to Bitcoin as one of the fastest-growing assets in the world. Due to this many people thought cryptocurrencies are not really a fad, and the future of cryptocurrencies seems brighter now.
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The latest news in bitcoin and many cryptocurrencies is both encouraging and discouraging. China recently banned cryptocurrencies but had seemed to have little effect on the market. On the other hand, the small country of El Salvador has adopted bitcoin as its official currency, which is a good sign. Although there are many controversies surrounding this decision, if Bitcoin prices keep staying high, El Salvador will remain a bustling economy.
Now the question remains, will bitcoin and other prominent cryptocurrencies go higher in the near future? Some of the top investors in the world seem to think so. And they are making their predictions
Will Bitcoin Reach $100,000 and Ethereum reach $40,000 by the end of the year?
The prediction of a top investor Raoul Pal is that bitcoin has a lot of room to grow and so the prices will only increase in the last quarter of 2021. Raoul Pal is one of the few investors in the world who saw the 2008 financial crisis coming. While everyone else lost money, he bet against the financial crisis and earned money from it with his predictions.
Past predictions by Raoul Pal
In 2020, months before the bitcoin prices skyrocketed to above $50,000 for the first time, Raoul predicted large price increases in BTC in October of 2020, saying “The chances that Bitcoin (BTC) will hit $40,000 and even $1 million have “risen dramatically” after the top cryptocurrency hit $10,000.” And now we know how BTC exploded in price in the first quarter of 2021, which makes Raoul a correct predictor of the event. That's why his future predictions will be useful.
Reasons behind bitcoin and Ethereum price prediction
In his recent interview, Raoul Pal quoted that cryptocurrencies like bitcoin are getting good fast adaption as the internet
— Raoul Pal (@RaoulGMI) May 13, 2021
This growth would explain why we see the bitcoin prices explode so much in the past year or so, and why it is staying there rather than crashing.
Bitcoin ETF approval
On top of that, the US government is yet to legalize bitcoin as an ETF (exchange-traded fund) and the decision for the bitcoin ETF is yet to happen.
What is ETF (exchange-traded fund)?
An exchange-traded fund (ETF) is like a share from the stock market, but slightly different. A share of a company represents a tiny chunk of ownership of a company (e.g. Apple or Google) which you can own. But a bitcoin ETF represents a small amount of bitcoin you can own through the exchange (e.g. NYSE).
Currently, the top exchanges (NYSE, NASDAQ) in the world do not buy or sell bitcoin. You must purchase cryptocurrencies through other exchanges like FTX or Kraken etc. if Bitcoin ETF will get approval then there are many more traditional investors on Wall Street who are very likely to invest in Bitcoin. These investors usually trade stocks and other conventional assets, but the approval of the bitcoin ETF will likely motivate them towards cryptocurrencies. We may see hundreds of millions of dollars entering the bitcoin market if the bitcoin ETF will get approval.
Ethereum supply shortage
He also quotes how currencies like Ethereum are in short supply (supply shock) because a lot of investors are staking their Ethereum in many investments and those are not available in the market for buying and selling. Hence, as high as 28% of all ETH might be frozen and not being traded, thus creating a shortage of ETH in the market.
Also, ethereum is burning some of its coins, which is also contributing to the short supply of ETH. This means that ETH is actually deflationary over a longer time span of a year, and thus this can contribute to a price increase of ethereum.
All the above information suggests that, if the market cap of BTC or ETH is increased substantially by institutional investors or demand by the public, then the prices of these coins will rise as a result.
The growing use of cryptocurrencies
Other things to consider are the apps being built on top of ethereum. Take NFTs for example, which has caused hundreds of millions of dollars to be spent on ethereum over the past year. And this has contributed greatly to the higher prices of ETH. And the number of apps that use ETH is only increasing, such as DeFi apps. If these apps become profitable in the future, then ETH prices will definitely increase.
What are NFTs?
NFT are Non-Fungible Tokens, which are used to transfer ownership of something using blockchain. To explain it more simply, take artwork on opensea.io for example; if you draw a beautiful painting and then want to sell it to someone, what is the best way of handing over ownership? By using the blockchain, you can securely transfer ownership of the art piece, and everyone in the world can verify the ownership, because information on the blockchain can not be tampered with.
And NFTs doesn’t just have to be about art, it can be used to transfer ownership of any digital asset in the world. Which means, NFTs have a huge potential in the future for trading of digital goods.
Even though investments like cryptocurrencies are always a bet, the information presented above seems to make it look like there might be a bull market coming. However, it is yet to be seen how these cryptocurrencies actually unfold and become useful in society. Only the wider adoption by the wider population will increase the prices of these cryptocurrencies.