As 2020 is slowly coming to an end, Bitcoin is holding strong above the $ 10,000. The popular cryptocurrency set a new record earlier this year by breaking the 63-day streak of the price holding above $ 10,000. At the time of this writing, Bitcoin has been holding the support level for no less than 82 days and has now broken a 3-year long bear trend entering into “no man’s land”. The public has once again chosen to buy Bitcoin hoping to see a future price appreciation.
To summarize Bitcoin’s performance over 2020, there are a few points we should briefly touch upon.
Bitcoin started the year on a positive note, growing nearly 30% in the first quarter of the year.
In March of the same year, the WHO officially labels COVID19 as a pandemic. Panic spreads across all financial markets and Bitcoin drops massively, reaching a 60% loss over a 1-week period.
Since the pandemic-related crash, Bitcoin has been showing strong signs of recovery and has almost made a vertical jump back to the $ 10,000 levels. At the moment, we are seeing more companies entering Bitcoin than ever before, following the predictions made in Vijay Boyapati’s excellent article: The Bullish case about Bitcoin. But are institutional investments the only reason that Bitcoin shows such promising potential?
But are institutional investments the only reason that Bitcoin shows such promising potential? In the following paragraphs, we will share our thoughts on Bitcoin’s growth and future potential.
Reasons behind Bitcoin’s growth
The public seems to be warming up to the idea of Bitcoin, and there are several reasons for this. Let’s break it down into the sections below:
Reason # 1: Economic uncertainty
It has been more than a decade since a financial crisis occurred. As we are currently bracing for the next round of lockdowns, many dreadful question marks arise. What will happen to the millions of unemployed workers? What about all the small businesses that were forced to close? How will the tens of trillions being injected into our economy going to affect inflation rates?
We are by all means cruising through unprecedented times. And, in situations like these, consumers search for different ways to diversify their cash holdings to protect the value of their money. Bitcoin and precious metals seem to be getting the lead at the moment, with valuable collectibles following close behind. The gradual allocation of savings and cash into Bitcoin generates a new wave of strong holders who expect to see the popular cryptocurrency grow to new highs in the coming years.
Reason # 2: Institutional investments
Due to the economic uncertainties that we are currently undergoing, many large companies have started to explore alternative investment options to protect their cash reserves. In just a short period of time, we witnessed a 600 million dollar allocation being made by public companies like Microstrategy , Square , and others.
The hypothesis is simple. If FIAT currencies are moved to the blockchain, we will still suffer from inflation, since it is very easy to mint new coins on demand. The only cryptocurrency that is completely decentralized is Bitcoin, which makes it extremely important as a reserve currency of the next decade.