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What is the Best Cryptocurrency to Invest in 2021? |
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30th Dec 2020

What is the Best Cryptocurrency to Invest in 2021?

Article Table of Contents:

The onset of the pandemic quashed global financial markets in March 2020. The crypto market suffered the same fate, taking Bitcoin prices (BTC/USD) to below $5,000. As the initial shock waned, the global financial markets gradually recovered. However, Bitcoin didn’t just recover, it went on a record run! The crypto king gained more than 280% year to date. On December 27, Bitcoin surged passed the $28,000 mark for the first time in history.

After such a phenomenal performance, is it really a good idea to invest in Bitcoin? Hasn’t the coin become too expensive, indicating downside in 2021? While Bitcoin could succumb to some selling pressure after the recent rally, this will be seen by experienced traders as an attractive investment opportunity. Let’s look at a few factors that could support and lift Bitcoin prices in 2021.

Low Confidence in Fiat Money

Investor sentiment for fiat money has been hit by reports of a possible collapse of the US dollar and speculation of the “annihilation of fiat currencies.” While this may be extreme, governments around the world have made policy decisions through 2020 that do not inspire much confidence in fiat currencies. On one hand, central banks of developed nations have cut their benchmark interest rates to near zero.
  • US Federal Reserve’s Fed Funds Rate: 0.00% to 0.25%
  • European Central Bank’s main refinancing rate: 0.00%
  • Bank of England’s base rate: 0.1%
  • Bank of Japan’s key short-term interest: -0.1%.

For their respective currencies, such low interest rates are detrimental. A lower the interest rate means a lower rate of return by investing in the country, which in turn means lower demand for that country’s currency. Since currencies appreciate or depreciate versus another currency, the impact of such low interest rates by all the major economies is not fully reflected in the forex market.

Fiat currencies have not just been hit by record low interest rates. The injections of funds to trigger economic activity during the covid-19 crisis also adversely impacted fiat currencies. This is because an injection of funds increases the supply of money in a country, exerting pressure on the value of a country’s currency.

Looking Ahead into 2021: On one hand, central banks have indicated plans of keeping their benchmark rates at record lows through 2021. On the other hand, the US and EU have stimulus packages that will come into effect next year.

Meanwhile, cryptocurrencies are increasingly being accepted as a mode of payment. The continued debasement of fiat currencies next year will exert pressure on FX currency pairs and lend support to crypto.


A rise in inflation rates means a decline in the value of money. Cryptocurrencies are widely traded as a hedge against rising inflation rates, which is what we are likely to see in 2021.
  • USA – The consensus estimate is for inflation to rise above 2% in 2021
  • EU – Expectations are pinned at a rise in inflation to 1.3% in 2021 and 1.5% in 2022

Institutional Interest

We saw growing institutional investment in the cryptocurrency market in 2020. There are already more than 200 financial institutions with crypto investments, and some traditional asset management companies have also entered the crypto space. Meanwhile, multibillion dollar companies like JPMorgan and Facebook have launched their own coins (JPM Coin and Libra). Such developments may continue to lend cryptocurrencies increasing credibility in 2021.

With Bitcoin (BTC/USD) being the leading name in the cryptocurrency space, it could be the primary beneficiary of all these factors. Analyst expectations are bullish heading into 2021. In fact, Citibank analyst Tom Fitzpatrick projects Bitcoin to reach a whopping $318,000 by the end of next year.