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With Bitcoin trading around $50,000 many readers are asking, “Am I in time to invest in Bitcoin, is it worth investing with Bitcoin at this price?”.

The quick answer to this question is: Yes, you are on time. We don’t think you’ll be late to the party. 

According to analysts at JP Morgan the price of Bitcoin will soar in the medium term to reach an estimated $146,0001, while the same investment firm believes it will reach $650,000 by the end of 20222

If we look at the mathematical models that aim to — and succeed in — forecasting the price of Bitcoin, the Stock to Flow (S2F, hereafter) model stands out. Said mathematical model was created by a Dutch institutional investor, whose identity has not transcended, with a background in the field of quantitative finance3. So far the S2F model has managed to forecast with astonishing accuracy all Bitcoin movements, and claims that its price will reach $288,0004 in the current growth cycle (Reaching $1 million in 2024). In a few paragraphs we will tell you all the ins and outs of this surprising predictive mathematical model, which so far has been accurate as clockwork

Bitcoin price chart
The chart shows the great growth that Bitcoin has had since November 2020, when it was trading below $14,000. Currently its price is around $45,000. In 4 months it has given returns of 220%.

In short and by way of summary: If you have not yet invested in Bitcoin you have in front of you the opportunity to achieve potential returns of between 265% and 1,525% in the medium term, according to the estimates of financial analysts and mathematical models mentioned.

Throughout this article we will explain everything you need to know to discover the real impact that Bitcoin has on the economy by proposing a paradigm shift, as well as everything you need to become an educated investor, able to take advantage of an opportunity that, perhaps, will never be presented to us again in our lives.

Table of contents

  1. Before You Invest: What is Bitcoin?
    • Bitcoin: the necessary alternative to the traditional monetary system
    • Bitcoin, the value of decentralization and utility in its purest form
    • Is Bitcoin a bubble?
    • The natural cycle of Bitcoin growth
  2. Investing in Bitcoin: Is 2021 a great time to invest.
    • Bitcoin’s forecasts and predictive models
    • The institutional adoption of Bitcoin: lower volatility, more stability, more growth
  3. Conclusion: The advantages of investing in Bitcoin in 2021.
    • Invest in Bitcoin for potentially unparalleled returns
    • Investing in Bitcoin to protect your wealth from inflation and unlimited money printing
    • Investing in Bitcoin to embrace the future
  4. UPDATE: How to invest in Bitcoin safely with a 100% regulated broker

Before you invest: What is Bitcoin?

Invest in bitcoin

By now you probably have a fairly formed idea about what Bitcoin is and what its function is. By way of summary, Bitcoin was created by a mathematician (or group of experts in mathematics and cryptography) self-named Satoshi Nakamoto. Although the actual identity of this person or group of people is unknown, it is believed that Bitcoin was created to:

  1. Create a digital and autonomous monetary system that does not depend on third parties or intermediaries. 
  2. To stand as a non-manipulable and non-controllable monetary alternative by governments and central banks. 
  3. To be a deflationary alternative in response to government inflationary policies (more on this later). 
  4. Create a method for creating, storing and transmitting wealth that is non-alterable, unforgeable, decentralized and impossible to commandeer. 

As we see what Bitcoin proposes is a paradigm shift: until now we have relied on governments and central banks to manage, support and manipulate the global monetary system; Bitcoin dispossesses these actors of such power

Bitcoin: the necessary alternative to the traditional monetary system

What gives Bitcoin its value?

To answer this question we first have to ask ourselves what gives value to the dollar. Until not so long ago the coins and bills that were in circulation were notes of exchange that could be exchanged for spot gold. Dollar bills included, in small print, “Ten Dollars: In gold coin payable to the bearer of this bill.” 

Dollar bill gold standard
1922 $20 bill, which still included the inscription “Twenty dollars in gold coins. Payable to the bearer on demand.”

In effect, in those days we could show up at the US Federal Reserve and ask to have our bill exchanged for its gold equivalent. All banknotes in circulation were backed by gold, held by the central bank of each country. 

However, some time later governments began to spend the gold they stored in their central banks. They realized that they could spend that gold and in parallel print more banknotes (not backed by gold) to generate unlimited wealth. Apparently nothing happened and the citizens did not complain. 

At that moment the world monetary system left aside the “gold standard”, and we went on to have a currency backed, solely and exclusively, by government imposition, with no real intrinsic value.  

This monetary system, called fiat or fiduciary, only has value because governments have forced it to be so by decree. 

And, of course, because we citizens have decided to obey. 

It only has value because we all obey and believe it should have value. Its value is based, solely and exclusively, on popular belief. 

However, the traditional or fiat monetary system has a terrible problem: It gives absolute power to central banks to print banknotes in an uncontrolled manner

When banknotes are printed uncontrollably, inflation is created. Printing banknotes does not mean creating wealth, quite the opposite: printing banknotes means stealing wealth from citizens, diluting existing wealth. 

Dollars printing bitcoin
The graph shows how in 2020 the number of dollars in circulation skyrocketed, due to the experimental monetary policies being implemented. | Source: Federal Reserve Bank of St. Louis

Money printing dilutes the value of money in circulation. Money printing is nothing more than a strategy of central banks to steal wealth from the citizen, to impoverish him even more. One need only look at the cases of Venezuela and Argentina. 

At this point, any reader will understand the inevitable need for an alternative monetary system, which is not under the clutches of states and governments, which is not manipulable and which does not leave citizens disempowered.

Bitcoin, the value of decentralization and utility in its purest form

As a counterpoint to the monetary scenario we have presented, Bitcoin appeared. However, it is quite possible that before investing in Bitcoin you are still asking yourself: but what really gives Bitcoin value?

  1. Scarcity: As Bitcoin was created, only a total of 21 million coins can be mined. As of this writing, 18.5 million Bitcoins have been mined, which means that only 2.5 million coins will be added to the current ecosystem.
  2. Supply and demand: Demand for Bitcoin increases continuously and steadily with each passing year and, because the supply of Bitcoins is limited to 21 million coins, by the law of supply and demand the price of the Bitcoin will tend to rise continuously. Because demand will increasingly outstrip supply, Bitcoin has been designed to continually increase in value and behave as a deflationary asset. (Inflation tends to reduce the value of a currency with each passing year; deflation does just the opposite, it steadily increases its value.)
  3. The collective belief: Gold or diamonds may have value because of their scarcity, but the main reason they have value is collective consensus: Every society in the world has unanimously decided that this is so. However useful Bitcoin may be, we cannot overlook this essential component: Bitcoin has value, among other reasons, because people have decided that it should be so.
    Bitcoin investment
    Bitcoin is the method of storing and transmitting wealth with the most qualities ever known.
  4. Utility: The utility that Bitcoin brings to today’s society is unquestionable. It serves to buy goods and services, it is divisible, it is transportable like no other known form of storing value, it is exchangeable, it is indestructible, it is unforgeable, it boasts great liquidity, it protects against inflation, it is decentralized and independent of any state, institution or corporation. In other words: Humanity has not known another form of storing and transmitting value that manages to concentrate all these virtues.     

Is Bitcoin a bubble? 

In recent years the mainstream media have repeated ad nauseam that Bitcoin was nothing more than a bubble, equating it, without any basis whatsoever, to the tulip bubble and other great bubbles in history. 

In fact, according to Bitcoin Obituaries5, the media have “killed” Bitcoin a total of 397 times, sentencing that it was pure speculation, a bubble, a fad… Articles and opinions that have certainly not aged well at all and that were written by someone who had no idea what he was dealing with.

What many today have not come to understand is that Bitcoin, like many other markets and financial assets, has a cyclical behavior. Its natural and healthy growth consists of sharp rises followed by not-so-sharp falls.

Bitcoin bubble investor
The mainstream media, unable to identify Bitcoin’s growth cycles, have repeatedly claimed that Bitcoin was nothing more than a bubble.

Most financial assets have a cyclical behavior, including large technology companies, gold or silver, or even commodities such as coffee.

The natural growth cycle of Bitcoin has its own peculiarities and idiosyncrasies, but fortunately it has already been studied enough today and we can draw on it to find out if right now is a good time to invest in Bitcoin.

The natural growth cycle of Bitcoin

As of the writing of this article, Bitcoin has gone through three complete growth cycles, and we are on the verge of the fourth. In each cycle the Bitcoin price grows exponentially. In fact to represent such cycles of Bitcoin a logarithmic scale is required, because with a linear standard one they cannot be properly appreciated. 

In the following chart you can see the Bitcoin growth cycles, which consist of months of strong rise in the price followed by slight declines (called corrections):

Bitcoin price projection
The chart shows the Bitcoin growth cycles, of great importance for anyone wishing to invest in Bitcoin. We are currently on the doorstep of the fourth growth cycle, a location indicated on the chart by the red placeholder. | Source: Tradingview.
  • First cycle (not shown in the chart due to space issues): It peaked in 2011 and reached a price of about $32.
  • Second cycle: Bitcoin peaked at $1,200, in late 2013.
  • Third cycle: It peaked in early 2018, reaching a peak price of about $20,000. 
  • Fourth cycle: Current growth cycle, in which we are still in its initial phase. For this cycle it is expected to reach a peak price of around $200,000, with Bitcoin reaching this peak in early 2022. 
  • Fifth cycle: In this cycle, the Bitcoin price is expected to break the $1,000,000 barrier, a milestone to be reached by the end of 2025.

Investing in Bitcoin: Is 2021 a great time to invest?

Something of great interest that we draw from analyzing Bitcoin growth cycles with perspective is that the current moment we are in (marked with the red marker in the image above) is an exceptionally good time to invest in Bitcoin

  1. First, we are at the beginning of Bitcoin’s fourth growth cycle, at the beginning of a confirmed uptrend. However, according to projections we still have a lot of growth ahead of us until we reach the $200,000 projected for this cycle. 
  2. Second, in the correction that will occur at the end of this cycle, the Bitcoin price is not expected to retreat to current levels. In other words: we may never again have the opportunity to buy Bitcoins at a price located around $40,000. 

The Bitcoin forecasts and predictive models

At this point, and before investing in Bitcoin, you will probably want to dig further into the predictive models that project the Bitcoin price to the levels we discussed a few paragraphs above. 

The Stock To Flow mathematical model

As we mentioned in the introduction, the best known and most respected model for the accuracy it has demonstrated is the Stock to Flow (S2F, hereafter). It is an adaptation of pre-existing models used to predict the price of commodities such as gold, silver or palladium, all of them–including Bitcoin–with a peculiarity in common: they have a limited amount of supply. 

As you may recall, the maximum number of Bitcoins that can be mined is 21 million, and currently 18.5 million of that total have already been “released”. Clearly, if demand continues to increase as it has so far, supply will not be enough to meet it. By law of supply and demand the only solution to that equation is for the price to grow to the levels posited by the S2F6 model. 

Stock To Flow Bitcoin predictive model
The Stock to Flow mathematical predictive model, which has so far been accurate as clockwork, projects the price of Bitcoin above $1,000,000 in 2025. | Source: Digitalik.

The S2F model is far more complex than what we have described here7, as it takes into account other intrinsic variables in Bitcoin, such as the halvings, the Bitcoins that have been lost, the cryptocurrencies that are available in circulation, the Bitcoin phase changes and clusters… However, it is too complex a mathematical model to deal with in detail in this article

Since the anonymous institutional investor known as PlanB published this mathematical model a couple of years ago the price of Bitcoin has continued to grow following the proposed pattern with astonishing accuracy. In fact, due to the accuracy of this model, S2F is considered to be the most accurate predictive model we have for predicting the price of Bitcoin

The most relevant aspect of this model is that it considers that in the fifth Bitcoin growth cycle it will reach an estimated price of $288,000, while in the medium term (in 2026, approximately) it could surpass $1,000,000

The forecasts of major investment banks and financial analysts

The S2F model might not have much relevance in isolation were it not for the fact that analysts from large investment funds agree, in whole or in part, in their predictions for the price of Bitcoin. 

The renowned investment bank JP Morgan published this past January its estimates on the price of Bitcoin, placing it in the medium term above $146,000, “because Bitcoin already competes with gold”8

The same financial analysts at the American firm were saying a few days later that, as soon as Bitcoin manages to breach the $40,000 barrier, “it is very unlikely to go back below those levels”9

JP Morgan on Bitcoin investment
Financial analysts at investment bank JP Morgan forecast that bitcoin will reach $146,000 in the medium term.

In the same vein in late 2020 an internal document from Wall Street giant Citibank was leaked, in which its analysts estimated that Bitcoin could reach $300,000 by the end of 202110, and called the dominant cryptocurrency “the gold of the 21st century”. 

Chamath Palihapitiya, the well-known billionaire investor, has no hesitation in placing the Bitcoin price at $200,000 in the medium term. “How long will it take? I don’t know, maybe 5 or 10 years, but it will get to that price,” he explains11.

Max Keiser, a financial analyst and Wall Street veteran who has managed to predict the price of Bitcoin with great accuracy, estimates that Bitcoin will reach $220,000 later this year: “With the hashrate reaching new highs, the 2021 target is $220,000.”12

In these paragraphs we have synthesized some of the most popular and relevant forecasts for anyone who wants to invest in Bitcoin. However, we could go on listing many more. The important thing in this regard is to understand that in the financial world there is consensus on one aspect: Bitcoin will continue to grow by leaps and bounds and exponentially; this has only just begun.  

The institutional adoption of Bitcoin: Less volatility, more stability, more growth

A few years ago there was much talk that when institutions (large banks, corporations, businesses and government entities) adopt Bitcoin there will be a point of no return in their growth

That distant horizon is today. 

While we were writing this article the news that Tesla had bought $1.5 billion in Bitcoin and that Elon Musk’s company was going to allow its customers to pay with this dominant cryptocurrency13 was made public. This news has propelled the price of Bitcoin to $48,000, a tipping point that will most likely mean we will never see Bitcoin below $40,000 again.

Elon Musk Tesla invest in Bitcoin
Recently Elon Musk communicated that Tesla had purchased $1.5 billion in Bitcoin to hold a portion of the company’s treasury in this cryptocurrency.

What does it mean that Elon Musk, the richest man in the world, has decided to put a part of Tesla’s treasury in Bitcoin? That many more companies are going to follow this path. 

Tesla has not been the first, other companies such as Microstrategy, Square or Paypal have been buying Bitcoins massively for months and trying not to make much noise

Big investment funds and institutional investors such as Grayscale, Morgan Stanley, ARK Investments or Rothschild Investment own Bitcoin, directly or indirectly. As reported by Bloomberg a year ago, almost 40% of US and European banking institutions already own Bitcoin or derivative products14. (Today it is very likely that this percentage has already surpassed 50%). In the US even retirement funds are starting to invest in Bitcoin15

All the Bitcoin buyers we’ve listed (and many others we haven’t mentioned) have been buying Bitcoin in excess of the available supply for months. There is no Bitcoin for everyone, and the market’s way of regulating supply shortage and excess demand is to continuously and steadily increase prices.  

The massive irruption of institutional investors brings innumerable benefits to the Bitcoin ecosystem. First of all, it acts by stabilizing the system, taking away volatility (sudden changes in price), while fostering continuous growth in the price of the dominant cryptocurrency. 

In short, the institutional breakthrough in Bitcoin has caused the market to mature by leaps and bounds. Gone are those days when Bitcoin could drop 40% in hours due to the weakness of a market primarily made up of retail investors. Institutional investors are “strong hands”, buy to hold and are not driven by cycles or one-off news.  Institutional irruption is synonymous with stability, growth and maturity. 

Conclusion: The advantages of investing in Bitcoin in 2021

At this point of the article you are probably already aware that we are living a paradigm shift, a historical moment. We have no doubt that in the not too distant future society will be divided between those who own Bitcoin and those who do not have such a privilege

By way of summary, we would like to summarize the advantages that investing in Bitcoin can offer us in the middle of 2021:

1. Invest in Bitcoin for potentially unparalleled returns

According to the mathematical models and forecasts we have seen in this article the price of Bitcoin will in the short term be above six figures, while in the medium term we can expect it to exceed a quarter of a million dollars

We are talking about potential medium-term returns located between 150% and 500%. What other asset or investment can give such high potential returns?

And we are not talking about “optimistic” forecasts. 

We are talking about history: Bitcoin has been, most probably, the most profitable investment we have ever had at our disposal for years. In the last 2 years it has given a return of +1,187%. In the last 5, of +10,536% (yes, ten thousand percent). In the month and a half so far in 2021 Bitcoin has already given a return of over +60%

Those who right now believe that it is already too late to invest in Bitcoin imagine what they will think when its price exceeds a quarter of a million dollars. 

2. Invest in Bitcoin to protect your wealth from inflation and unlimited money printing

In recent months we have witnessed the US Federal Reserve and the European Central Bank moving towards experimental monetary policies based on quantitative easing.

The Western central banks that control the euro and the dollar have decided that the solution to get out of the economic crisis caused by COVID-19 is to print more money to inject into the economies.

This experimental and historically unprecedented solution – widely criticized by large sectors of society – has begun to devalue the price of the dollar and the euro and is putting economies at risk of hyperinflation.

In the US, 35% of all dollars in circulation have been printed in the last 10 months16. The Federal Reserve printed more bills in a single month than in 2 entire centuries17.  

In the face of this unprecedented manipulation by Western governments and central banks investing in Bitcoin is not a possibility; it is imperative to protect our purchasing power and grow our wealth

3. Invest in Bitcoin to embrace the future

For many investing in Bitcoin has a clear ideological component. Investing in Bitcoin means embracing the paradigm shift we are living, it means repudiating the current monetary system manipulated and controlled by the powerful to evolve towards a fairer, more equitable, unmanipulable and decentralized monetary and store of value system

Investing in Bitcoin today also represents being part of a minority of early adopters. Although it may seem that Bitcoin has already intensely penetrated society we are still at a relatively early stage; it may seem to be late, but a look with perspective shows us otherwise. 

And as has happened in the past with other advances, early adopters usually benefit from being pioneers in embracing a new technology. As of this writing, it is estimated that 100 million people own Bitcoin18, representing just 1.32% of humanity. It is estimated that only 0.01% of humanity owns more than 1 BTC19.

It seems plausible to think that in the not too distant future society will be divided between two types of individuals: those who have been able to accumulate considerable amounts of Bitcoin, and those who have not.

Bitcoin may represent an unparalleled wealth redistribution opportunity: but only for those willing to pay attention to it and determined to undertake the movement. Elon Musk, one of today’s most privileged and visionary minds, seems to have realized just in time.  

Update: How to invest in Bitcoin quickly and completely securely

Investing in Bitcoin, although relatively simple nowadays, is not a risk-free activity. For now we still can not go to our traditional bank to make the management, and there are many scams that aim to trap the unwary

Similarly, we find a multitude of exchanges located in tax havens, China or in places that do not require any type of regulation and do not offer any guarantee to the customer

One of the few reliable alternatives we found is the broker eToro.com, one of the most well-known and widely used exchanges worldwide. Based in London and authorized by the CySEC and the FCA (the UK Financial Authority) it is the favorite choice of more than 20 million investors worldwide. It’s fast, it’s easy and it has the guarantees required by international regulators.

eToro.com is the only exchange we can recommend to our readers without reservation. In addition eToro.com allows you to add funds instantly via Paypal, credit card or bank transfer, among others. 

Creating an account at eToro.com takes no more than 5 minutes and is completely free:

> Create your free account at eToro.com <

And start investing in Bitcoin and other cryptocurrencies in minutes with a regulated broker.

Legal & risk warning: eToro is a multi-asset platform which offers CFD and non CFD products. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Cryptoassets are highly volatile unregulated investment product. No EU investor protection.

How to buy Bitcoins in 5 minutes on eToro?

1. Create a free account at eToro.com

For your convenience, you can log in with your Facebook account. Once we have entered our data, we will arrive at the following screen:

 

2. Deposit the funds you want to invest in Bitcoin

In the bottom left corner, click on the “Deposit funds” button. It will take you to the next screen:

Enter the amount we want to deposit. We recommend starting with small amounts, in the order of $500 or $1,000. There is always time to invest more money.

In this screen we will have to select the payment method. You can choose between depositing funds by credit card, bank transfer, Paypal… In our case we choose Paypal as it is a very safe payment method that offers protection to the buyer.

3. Buy the amount of Bitcoin you want

With the deposit made, click on the left menu “Instruments”. In the next screen you will find several cryptocurrencies to invest in:

In our case, to buy Bitcoins, we search for the symbol BTC and click on “Buy”. The following window will open:

We enter the amount we want to buy at this very moment ($1.000 in our case) and click on “Open Trade”. And at that very moment, We are already the proud buyers of a portion of Bitcoin equivalent to $1.000!

It should be added that, of course, eToro also offers us the option to sell the Bitcoins when we decide that the time has come to liquidate our investment and take the potential profits. At that moment our cryptocurrencies will be sold at the market price and the dollars from closing the transaction will appear in our account. And not only that, but eToro also offers the possibility of “betting” down through orders known as short sell: These orders allow us to profit from an asset that is in decline.

ARTICLE REFERENCES

  1. https://www.bloomberg.com/news/articles/2021-01-05/jpmorgan-sees-146-000-plus-bitcoin-price-as-long-term-target
  2. https://www.express.co.uk/finance/city/1377180/bitcoin-price-latest-tim-draper-jp-morgan-estimate-max-keiser
  3. https://100trillionusd.github.io/#:~:text=PlanB%40100trillionUSD%20is%20a%20Dutch,gold%2C%20silver%20and%20other%20assets.
  4. https://cointelegraph.com/news/bitcoin-is-targeting-288k-stock-to-flow-price-like-clockwork-planb
  5. https://99bitcoins.com/bitcoin-obituaries/
  6. https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25
  7. https://medium.com/@100trillionUSD/bitcoin-stock-to-flow-cross-asset-model-50d260feed12
  8. https://www.cnbc.com/2021/01/05/jpmorgan-bitcoin-price-could-rise-to-146k-as-it-competes-with-gold.html
  9. https://www.entrepreneur.com/article/364066
  10. https://www.forbes.com/sites/billybambrough/2020/11/19/leaked-citibank-report-reveals-bitcoin-could-rocket-to-300000-price-by-end-of-2021/?sh=53fc68de6eab
  11. https://www.cnbc.com/2021/01/07/palihapitiya-says-money-in-savings-will-be-rocket-fuel-for-assets-like-housing-and-stocks.html
  12. https://coinmarketcap.com/headlines/news/max-keiser-bitcoin-btc-to-hit-220000-in-2021-as-per-hash-rate-adjustments/
  13. https://www.lavanguardia.com/economia/20210209/6232872/tesla-compra-1250-millones-bitcoins-dispara-criptomoneda.html
  14. https://www.bloomberg.com/news/articles/2020-06-09/fidelity-says-a-third-of-large-institutions-own-crypto-assets
  15. https://es.investing.com/news/cryptocurrency-news/sube-el-bitcoin-los-fondos-de-pensiones-de-eeuu-invierten-en-criptomonedas-735796
  16. https://netcoins.ca/blog/35-of-all-u-s-dollars-in-existence-have-been-printed-last-in-10-months/
  17. https://cointelegraph.com/news/us-printed-more-money-in-one-month-than-in-two-centuries 
  18. https://www.buybitcoinworldwide.com/how-many-bitcoin-users/
  19. https://bitcoinist.com/how-many-people-actually-have-at-least-1-bitcoin/

 

Legal & risk warning: eToro is a multi-asset platform which offers CFD and non CFD products. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Cryptoassets are highly volatile unregulated investment product. No EU investor protection. This content is intended for information and educational purposes only and should not be considered investment advice or investment recommendation. Indicative prices for illustration purposes. Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision. eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro. 

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