While the price of Bitcoin has just crossed a new all-time high, the predictions of its next record are all the crazier.
Bitcoin at $100,000? Bitcoin at $500,000? Anything seems possible.
But what do we expect from Bitcoin in 2021? What improvements are planned? Will the market remain optimistic? How will regulators react to its growing adoption?
Bitcoin is technical!
Bitcoin is first and foremost a computer protocol, and anyone can propose to change its rules. These Bitcoin Code review Improvment Proposals are reviewed, integrated into the source code and implemented if there is a consensus.
Bitcoin is not perfect, far from it. Future network improvements are eagerly awaited. It is a question of strengthening – again and again – its scalability, but also its confidentiality.
A Bitcoin transaction is a message, signed using the private key of its sender. The Schnorr authentication protocol is a new signature scheme for Bitcoin. Lighter, more flexible, it is also more confidential. At the moment, Bitcoin uses Elliptic Curve Cryptography (ECDSA).
Schnorr’s signatures provide the same level of security, but with additional benefits. They are lighter, and can also be easily aggregated. Transaction sizes are expected to decrease by 30-75%.
Initially proposed in 2015 by Pieter Wuille, this enhancement will be integrated into Bitcoin Core version 0.21 under the code name BIP 340. Its activation will take effect during a soft fork, i.e. a change in the consensus rules of the Bitcoin protocol – these new rules will remain compatible with the previous ones.
Taproot is a much-anticipated feature, as it is the one that will make Bitcoin transactions more confidential.
The idea is to combine the signature aggregation proposed by Schnorr’s scheme with a new data structure, called MAST, to offend the contents of a Bitcoin script. Multi-signature transactions and the content of their conditions will thus be similar to classic transactions, in the eyes of an outside observer.
Once Schnorr’s signatures are implemented, Bitcoin’s scripting language will need to be able to use their new features. The future update of this language is called Tapscript. and allows the verification of these cryptographic signatures.
The three enhancements (BIP 340, BIP 341 and BIP 342) represent 700 lines of code. This major update of Bitcoin, prepared by more than 30 experienced developers, is certainly the most expected technical event in 2021.
2021: a bull year for Bitcoin?
Beyond technology, the many Bitcoin users are also there to speculate and make money.
I’m here for the tech, you know
In the year 2020, the world of traditional finance has become particularly interested in BTC. Several listed companies have injected part of their capital into digital gold. For these market players, Bitcoin has more the function of a financial asset than a currency.
All HODLer (bitcoin owner) is obviously hoping for a bull market in 2021 comparable to that of 2017. And with good reason: if history repeats itself, the price of BTC should once again experience exponential growth.
In terms of technical analysis, there are indeed many very positive indicators. Bitcoin has just passed its historical resistance level of $20,000, an extremely powerful bullish signal. After each crossing of its ATH, the price of BTC then soared.
Buy the rumor, sell the news
Watch out! No asset goes up in a straight line to the Moon. And on Bitcoin, the more bullish the market is, the steeper the corrections that mark the evolution of its price. For example, during the crazy bull run of 2017, the price of BTC counted several corrections of more than 25%.
Bitcoin weekly 2014-2020
The price of bitcoin on a weekly basis since 2014. Blue lines: the two historical resistances (ATH). Red arrows: major corrections during the last bull run (2017).
We can therefore expect a lot of volatility in 2021. Those who think they are missing the train can rest assured: there will be plenty of opportunities to buy the lows. The weekly 20-period moving average for Bitcoin is a good indicator of when to buy BTC in a bull market. In the past, its price has always bounced back after touching it.