Despite these pessimist expectations, the cryptocurrency industry -in contrast to the global financial markets- looks bright since digital asset ownership has risen from $1.53bn at the beginning of 2020 to $6.1bn today in terms of investment products. Bitcoin is still the most dominant cryptocurrency that showed a tremendous surge in 2020, surpassing $20,000 for the first time.

In 2020, Bitcoin was preferred, along with gold, like a security blanket by many in a time of loose monetary policy and a weak economy accelerated by the coronavirus outbreak. However, there is still an ambiguity concerning the possible challenges that Bitcoin might face in 2021. These challenges could be categorized under five subtopics: adaptation, competition, regulation, volatility, and inflation.

In 2020, Bitcoin gained attention from the primary economic environment that had never been seen before in Bitcoin’s history. It seems this interest will gradually grow in 2021 as governments and central banks, particularly in Europe and the U.S., are embracing Bitcoin and digital assets for their clients. Also, pioneering fintech companies like PayPal and Square, Inc. provide their customers with opportunities to buy and sell Bitcoin.  Adaptation of Bitcoin by the mainstream institutions is a positive and reassuring sign for the legitimacy and extensive usage of Bitcoin in the long term.

Big tech companies’ search for developing their digital currencies and governments’ aim for regulating the cryptocurrency industry might pose a challenge to Bitcoin. While giant firms such as Google and Facebook are keen to compete with Bitcoin, governments attempt to regulate Bitcoin through central banks. This attitude illustrates that the intention is to compete with Bitcoin rather than banning it to turning Bitcoin into a popular black-market currency. However, this is an early stage, and there is still no candidate to replace Bitcoin today.

Another challenge is Bitcoin’s volatility, which makes it an unpredictable asset indeed. While it is a fact that Bitcoin remains volatile, the reason is that because it is not subject to fiscal or monetary policy. However, experts state that gold also suffered from volatility in its journey of becoming an investment store of value during the 1970s. Investors increasingly tend to utilize Bitcoin for saving. Hence, as Bitcoin develops into a store of value, its volatility will likely decline.  

In conclusion, Bitcoin seems to be being adopted more day by day and moving to the mainstream. While the increasing trend will contribute to Bitcoin’s legitimization and adaptation, that will also protect it from inflation, volatility, and debasement. Moreover, despite big tech companies and governments looking for issuing their own digital currencies, these options are far from competing with Bitcoin.