Factors New Investors Should Consider When Buying BTC in 2021

The end of this year has been triggering the cryptocurrency-focused subreddits and feeds of Bitcoin holders as the appetite for digital bullion reached an all-time high.

The work-from-home dynamic fuels digital transformation. It increasingly looks like the next year will be an action-packed year for the next chapter in the Bitcoin network’s evolution.

Let’s look at some of the critical areas we need to pay attention to in 2021.

The anticipated price appreciation

According to the famous model, the range extends from $65,000 to $288,000.

Meanwhile, CitiBank has recently declared its estimate of $318,000; the Winklevoss twins have suggested $500,000, and Ark Investment CEO Catherine Wood seems to agree with the latter.

Lack of mining hardware

The problematic aspects of getting behind a Bitcoin miner are the low entry barrier and the highly efficient and competitive proof-of-work network.

Anyone can donate their computing power to mining Bitcoin. However, with a very low probability of successfully mining a block and being the first to solve the hash algorithm.

Besides, no matter how long the mining hardware arms race continues, Bitcoin cannot be mined faster than 6.25 BTC every 10 minutes thanks to the provisioning schedule and difficulty setting that Satoshi Nakamoto built into the protocol. This has a substantial impact on the supply and demand dynamics of Bitcoin.

GBTC vs Bitcoin

Grayscale’s Bitcoin Trust moves OTC. It lets investors gain exposure to the underlying digital currency in popular brokerage accounts, such as a closed fund.

GBTC performs slightly worse than BTC during a price consolidation period.

GBTC performs somewhat better than the underlying asset. Especially as the premium expands and increased market demand interferes with the OTC investment vehicle’s inefficiencies versus the real-time price of the underlying asset. This is noticeable in the widening gap created by the price increase over the last two months.

Offer and demand

Every ten minutes, a block is mined, and as reward compensation per block, 6.25 new Bitcoin are created.

To clarify this, every hour, 37.5 BTC is mined. That translates into 900 new BTC per day. Before the Bitcoin halved on May 11, this figure was 12.5 BTC every 10 minutes, and in 2024, it will drop further to 3,125 BTC.

The daily addition to the market capitalization of Bitcoin falls at approximately $16.7 million of freshly mined coins at current prices. 

The demand is 6.9 times higher than the new supply. Hence, it is clear that there is a growing gap between the need for Bitcoin and the newly mined coins entering the market.