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Why This Citibank Analyst Expects Bitcoin to Reach $318,000 in 2021 |
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08th Jan 2021

Why This Citibank Analyst Expects Bitcoin to Reach $318,000 in 2021

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In a report titled Bitcoin: 21st Century Gold, Global Head of Citifxtechnicals, Citibank Group, Tom Fitzpatrick predicted that the price of Bitcoin could touch $318,000 by the end of 2021. Fitzpatrick explained that the BTC weekly charts and technical analysis of historic highs and lows had been used to come up with this prediction. While the Citibank analyst accepted that his forecast might seem fantastical, he also argued that this huge price surge would still be the “weakest rally” for the cryptocurrency, compared to assets like gold. He also stated that Bitcoin has long been characterised by “unthinkable rallies followed by painful corrections.” So, the digital asset is likely to see large price swings before reaching the predicted high of $318,000.

Bitcoin in 2021: So Far, So Good

Fitzpatrick’s prediction might have seemed a little far-fetched when the report was leaked in mid-November 2020, when Bitcoin was still struggling to reach its 2017 high. It is much more believable in 2021, with BTC rising from below $29,000 on January 1 to over $40,000 by January 7. Not only did the BTC USD price double in less than a month, the digital currency rose 13.45% in just the 24 hours between January 6 and January 7.

So, in the first 7 days of the New Year, the cryptocurrency was up 36%, rising to more than double the high of $19,783, achieved during the bull run of 2017. Bitcoin’s market cap stood at $746 billion on January 7, 2021, making the digital asset more valuable than all publicly traded companies, bar the top 7. The market cap placed the cryptocurrency between Tesla, with a market cap of $758.8 billion and Tencent, valued at $723.0 billion.

In fact, Bloomberg analysts predict that Bitcoin’s market cap would rise to $1 trillion through the year.

Support for the Citibank Prediction

One of the key arguments that Fitzpatrick has made in favour of Bitcoin is that the cryptocurrency’s current price movements appear to be very close to that followed by gold during the 1970s. This was the time that structural changes were brought about for the yellow metal, such as decoupling it from fiat currencies. Prior to this, gold has been range bound at $25-$35 for over half a century. In 2020, gold once again saw a surge, setting a new high in August, crossing the $2,000 mark. 

The changes in monetary policy related to gold were brought about in the 1970s to bring in greater financial discipline, while addressing deficits and inflation. Given that Bitcoin too came into existence in the aftermath of the 2008 financial crisis, it could follow in gold’s footsteps. In fact, Fitzpatrick went on to state in his report that BTC has been characterised by significant price swings through its existence, “exactly the kind of thing that sustains a long-term trend.” 

Another factor in Bitcoin’s favour is the printing of currencies that governments have resorted too, to bolster their pandemic-hit economies. With large amounts of fiat currency entering into circulation, both gold and Bitcoin could benefit. On the other hand, BTC is not limited by some of the factors that impact the attractiveness of gold. 

Physical gold requires storage costs, while being non-portable. Digital gold has no such restrictions, while offering ease of cross-border transactions, unlike gold. In addition, while cryptocurrencies might face greater regulatory oversight going forward, unlike central bank digital currencies, BTC cannot be confiscated. This security and its advantages over gold are likely to make it appealing for investors. 

An additional aspect that Fitzpatrick focused on was the history of Bitcoin’s bull runs. The digital asset has witnessed three such instances over the past decade. The first was a 10-month bullish period that lasted from 2010 to 2011. This was followed by a bull run that lasted for two years, from 2011 to 2013. The third one lasted three years, from 2015 to 2017.  

This indicates that the current and fourth bull run could continue for four years. Since it started in early 2019, the bullish trend might persist till late 2022. In fact, Fitzpatrick went on to state that the current BTC rally could “potentially peak in December 2021, at the high of the channel, suggesting a move as high as $318,000.” 

On a final note, Citibank had also released another report that predicted that the roll out of the coronavirus vaccine could put downward pressure on fiat currencies, especially the USD, through 2021, which could be a positive for Bitcoin. In addition, the rising interest in digital assets among large investors could prove to be another driver of BTC price. 

Do you agree that Bitcoin is in for a prolonged bull run?