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Is Bitcoin still a good investment in 2021?

What is Bitcoin, and how does it work?

Bitcoin is the first cryptocurrency in the world. It was created at the beginning of 2009 by an anonymous person called Satoshi Nakamoto.

Like most digital currencies, Bitcoin is not issued by a central authority. Therefore, it is immune to government manipulation and is completely independent of the banking system.

The only thing Bitcoin relies on is the power of the blockchain, which is a sort of database that stores information electronically in many chained blocks. In addition to saving the data related to Bitcoin transactions, this technology allows users to know when the blocks are added to the chain and empowers the system’s security.

Moreover, the blockchain allows people to “mine” Bitcoin. “Miners” are the people who are part of the Bitcoin network and invest their computing power to process the transactions. In exchange for their contribution to the blockchain, miners are rewarded with several bitcoins.

Bitcoin price changes over the years

Cryptocurrencies are famous for their unstable prices, but this doesn’t necessarily imply that they’re not a good investment. Instead of paying attention to the short-term price fluctuations, we should consider their performance in the long term.

Bitcoin performance in 2017, for example, was great. Bitcoin price reached $1,000 in February 2017, then climbed to $4,490  in August. It fell a little bit in September 2017 but shot back up quickly and reached the $19,981 barrier in mid-December.

However, 2018 and 2019 were not good years for Bitcoin. Despite many ups now and then, the cryptocurrency lost more than 70% of its value in that period.

Bitcoin price started recovering in March 2020, and its performance became spectacular in the last trimester of the year when it broke its previous record of 20,000$. This rise was mainly due to Tesla’s investment in Bitcoin and PayPal’s announcement concerning the launch of services enabling US users to buy Bitcoin with PayPal.

Bitcoin price kept rising till March 2021, when it reached more than $58,000. It became stable before dropping almost by half in May.

Why do people invest in Bitcoin?

Despite its volatile nature, Bitcoin has imposed itself as a strong currency and a safe store of value. 

The popularity of Bitcoin among investors has increased considerably since the start of the COVID-19 pandemic. This can be easily seen in the evolution of Bitcoin price since the second half of 2020.

Moreover, recent data shows that the number of Bitcoin wallet owners has climbed after the pandemic, proving that both the global interest and adoption of Bitcoin have increased.

It is known that the pandemic has created a big financial crisis in a lot of countries throughout the world, and this situation urged investors to seek a new and safe-haven asset: Bitcoin, which was the best performing asset class in 2020, thanks to its deflationary and censorship-resistant characteristics.