Bitcoin’s amazing 2020 run
As we make our way through the fourth quarter of 2020,
Bitcoin staged a spectacular comeback from its March lows – by May, BTC had already recovered to its pre-crash levels. In late July, Bitcoin crossed the $10,000 price level, and it has stayed there since. The price of Bitcoin has been above $10,000 for 100 days now, which is BTC’s longest streak above $10K ever. The second-longest streak came in 2017-2018, when BTC held above $10,000 for 62 days.
At the moment, Bitcoin is trading at $13,700. BTC managed to reach a similar price level in June of 2019, but the market was much more volatile back then. In the same weekly candle, BTC almost touched $14,000 but then retraced all the way down to $10,800. This time, the action is much less volatile.
Comparing the 2019 and 2020 BTC rallies with a weekly chart of the BTC/USD trading pair on Bitstamp. Image source: TradingView
In addition, Bitcoin just posted its October monthly close at approximately $13,825, which is only a few dollars shy of its highest ever monthly closes in December of 2017 and January of 2018.
Comparing the 2017 and 2020 BTC rallies with a monthly chart of the BTC/USD trading pair on Bitstamp. Image source: TradingView
To get a clearer picture of how long Bitcoin has stayed above certain price levels, check out this unique chart:
Love this chart.
— Travis Kling (@Travis_Kling) October 31, 2020
h/t @Pladizow pic.twitter.com/xTJerI02RT
With that context in mind, let’s quickly recap Bitcoin’s amazing 2020 run.
The third Bitcoin halving
Fundamentally, the biggest event of the year for Bitcoin was the third Bitcoin halving, which happened on May 21. In the third halving, the Bitcoin block reward dropped by 50% from 12.5 to 6.25. Each Bitcoin halving is perceived as a highly bullish event, as it should theoretically reduce the selling pressure originating from miners.
Simply put, miners have less BTC to sell after each halving. Even though there are countless factors that influence the price of Bitcoin, it’s probably not too outlandish to claim that the third Bitcoin halving had some kind of effect on Bitcoin’s big run in the second half of 2020.
| Halving date | Price at halving | After 3M | After 1Y | Notable events |
|---|---|---|---|---|
| Nov 28, 2012 | $12.2 | $33.4 (+174%) | $1,030 (+8,340%) | Mt. Gox collapses in Feb 2014 |
| July 9, 2016 | $660 | $625 (-5%) | $2,550 (+286%) | BTC $20,000 ATH in Dec 2017 |
| May 11, 2020 | $8,600 | $11,650 (+35%) | ??? | COVID-19 pandemic |
Growing institutional presence
In addition to the halving, we have also seen multiple signs that institutional players are starting to take Bitcoin much more seriously. Grayscale, a cryptocurrency asset manager that offers institutional-grade cryptocurrency investment products, posted record inflows in each quarter of 2020 so far. In Q1, Grayscale recorded $503 million in inflows. In Q2, the figure rose to $905 million, and it broke the $1 billion mark in Q3.
Legendary macro investor Paul Tudor Jones revealed in May that his fund will be trading Bitcoin futures as a response to a phenomenon he dubbed ?The Great Monetary Inflation?, caused by aggressive money printing. He noted Bitcoin’s scarcity and the growing digitization of money as factors that influenced his decision.
In a note to investors, Jones wrote:
"I also made the case for owning Bitcoin, the quintessence of scarcity premium. It is literally the only large tradeable asset in the world that has a known fixed maximum supply. By its design, the total quantity of Bitcoins (including those not yet mined) cannot exceed 21 million."
In August, business intelligence firm MicroStrategy announced that it had purchased $250 million worth of Bitcoin, and that it was making BTC the company’s primary treasury reserve asset. The company doubled down on Bitcoin in September, when it announced an additional Bitcoin investment worth $175 million.
After MicroStrategy broke the ice, many in the cryptocurrency community started to wonder whether more companies will follow. The answer came already in October, when financial services company Square revealed that it had invested $50 million, or 1% of its total assets, into Bitcoin.
In October, the cryptocurrency community was hit with another bombshell when payments giant PayPal launched cryptocurrency buying and selling on its platform. At the moment, PayPal users in the United States can buy
Even though it was not a total surprise - PayPal’s move was first reported in June by cryptocurrency news outlet CoinDesk – PayPal’s entrance into the cryptocurrency space had a big impact on cryptocurrency market sentiment.
As an aside - with Bitcoin being discussed as a hedge against currency devaluation and central bank interventions, it’s especially amusing to follow BitcoinStimulus, a Twitter account that tracks the performance of a hypothetical $1,200 investment into Bitcoin made at the time when US citizens received their $1,200 stimulus checks. On April 15, BTC was trading at $6,800. If you spent $1,200 to purchase Bitcoin at the time, your BTC holdings would now be worth $2,417.
What’s next for Bitcoin?
What’s going to happen next? Nobody knows, but there’s no shortage of Bitcoin bulls. 7-figure Bitcoin price predictions are not uncommon, and many believe that Bitcoin is well-positioned to make a run to a new all-time high price.
Bitcoin is also looking strong from a technical perspective, and is trading above almost all the relevant moving averages tracked by CoinCodex.
Of course, you should keep in mind that Bitcoin is a risky asset, and large price drops can occur in a short period of time. Make sure to carefully consider your financial situation before making any kind of investment and never invest more than you’re willing to lose!
