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How 2020 Redefines Bitcoin

One year has passed, and we are heading towards the end of 2020. It is a year people will never forget — global pandemic, economic downturn, and much more you can name. Amid the strike, sarcastically, it is also the year of Bitcoin (BTC). As of December 22, Bitcoin has increased by about 203% year-to-date, topping $24209.66. In the past, Bitcoin was considered as a scam by many. However, things are different in 2020 and, like the pandemic, it may never be the same. This article aims to be a year-end roundup to analyze the reasons why Bitcoin keeps breaking its all-time highs in 2020 and educate our readers the value of Bitcoin and hence cryptocurrency in general.

Bitcoin Halving

The Bitcoin surge shocks the world. Nevertheless, it comes as no surprise to cryptocurrency analysts because of the last Bitcoin halving that took place on May 11, 2020. From there onwards, BTC miners will go from earning 12.5 BTC per block mined to 6.25 BTC. At its simplest, Bitcoin halving is when the pace of new bitcoin creation is cut in half, which happens about every four years. Historically speaking, Bitcoin halving has exhibited itself as an extremely positive event for price action. The first halving happened in 2012 and then BTC went on a historic gain almost immediately as it skyrocketed by almost 8000% over the next 12 months. The second halving happened in 2016 and ultimately drove BTC by almost 3000% increase over the following 18 months. There are many theories to explain the price increase with the most common one being supply and demand: if fewer BTC are being generated, the newly increased scarcity automatically makes them more valuable. Regardless of different theories, historical figures prove that BTC does skyrocket 12–18 months after each halving, therefore many crypto enthusiasts have been diving in in between 2020 with a hope to profit from the BTC craze, which pushed BTC demand into an all-time high. As the supply is finite, it is no wonder why BTC price keeps soaring.

Institutional Adoption

Massive amounts of BTC are being accumulated by wealthy investors and giant companies in 2020, increasing the BTC demand and decreasing the circulating supply. In total, 1,150,622 Bitcoin now valued at the time of writing at $26,359,145,658 has been purchased by companies, most of which has been accumulated this year. The most notable investor is American business analytics firm MicroStrategy which has purchased 70,470 BTC this year valued at $1614 million. It attempts to adopt BTC as a treasury reserve asset to hedge against fiat inflation. Another well-known company is Square which purchased 4709 BTC in October at the price of $50 million. It equals to 1% of the company’s total assets. The firm believes that BTC will get more widely adopted in the future, and hence it wants to step in as earliest as possible.

Aside from companies aggregating BTC, many other starts to provide services for cryptocurrencies. In October 2020, PayPal announced to allow its 360 million users to buy and spend BTC and a handful of other major cryptocurrencies. As you can imagine, the move helps BTC go mainstream as more people can now gain easy access to the coin. Hence, it is no wonder why BTC price has been on fire in 2020.

Coronavirus

The pandemic is propagating the reassessment of Bitcoin since people has lost their trust in governments and stock markets over time. During the pandemic, a lot of money printing has happened globally leading to inflation. Worse still, the stock markets have been very shaky. People start to review the possibility of cryptocurrencies to protect their assets. As BTC has a limited supply and is more or less deflationary, it is seen as a store of value. People believe it is COVID-19 immune and is a safe haven under the pandemic. Hence, they have been flocking to the BTC market and further stimulates the price surge.

Final Thoughts

When Bitcoin was created, the inventor Satoshi explicitly stated that the reason for creating this digital cash system is to remove the third-party intermediaries that are traditionally required to conduct digital monetary transfers. In 2020, his dream starts to get realized — both retail and institutional investors are jumping into the space on an unprecedented scale. It is the year when people look into BTC differently. It is the year when BTC goes mainstream in real-world applications. It is the year when we can shout ‘merry Christmas, BTC holders!

Opinion Disclosure: The views and opinions expressed herein are those of the author and do not necessarily reflect the views of ACDX or its employees.

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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Amy Wong

Amy Wong

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