Bitcoin had a landmark 2019 despite the price weakness towards the end
The premier digital coin set some new records apart from being crowned the best investment of the decade
It has been quite a journey for the premier digital currency of the World. Although the idea was conceived with Satoshi Nakamoto publishing the white paper (Bitcoin: A Peer-to-Peer Electronic Cash System) in November 2008, the practical implementation of the idea went into effect on Jan. 03, 2009 with the launch of the Bitcoin Blockchain network (or the genesis block). But it wasn’t until more than a year later, in March 2010, when BTC started trading for $0.03 in the now-defunct BitcoinMarket.com.
Ever since then, Bitcoin has seen lots of ups & downs in more than a decade — from major price corrections, volatility spikes, FUD overload, the wrath of the skeptics & the euphoria of its proponents. Yet its resilience not only as an alternative form of digital payment but more importantly as the torch-bearer of a major paradigm shift has kept it on the path of improvement, growth & acceptability.
Best Investment of the decade
Bitcoin started the year with the longest bear market taking shape. Priced around $3700 at the time, the crypto kingpin spent the next three months consolidating in range-bound trading, before it came alive on April 2nd to start its ascent. The bull rally continued till Jun. 26, by which time BTC had more than tripled in value to around $13,800.
Some of the pundits started predicting the “million-dollar march” only to be proven hopelessly wrong as Bitcoin started its slow grind downwards. As we head to the year-end, the price is hovering around $7200 at the time of writing — equally supporting both the bull & bear run scenarios in the short term.
For bears, BTC has been making lower highs for the past five months with gains capped under the bearish trend line with a strong resistance zone in the $9,000–$9,500 region. The bulls are predicting support forming in the $6500-$7,000 zone which should provide the platform for an eventual bull run. While the Short term picture points to weakness, the BTCUSD price staying above the longer time 200-week moving average still supports a bullish scenario for the long term (right chart below).
Looking at the bigger picture, there is no single investment that can match the returns of the last decade that Bitcoin has seen. An investment of $1 in BTC at the start of 2010 would have given you a staggering return of $95,000. This return humbles even the best performing investments in the World. Compare this to some of the traditional investments:
- The American stocks which have seen a record 10-year bull run, returning 25% this year alone would have returned you $3.46
- 30-year US treasury bond over the same time period would now be worth $2.08.
- Gold, which is considered as a hedge against risky investments & a traditional store of value would be worth a mere $1.34
You get my point.
Increased Institutional Adoption
While the bull run was was ongoing in the spring of this year, very little of the BTC supply actually left the digital wallets of holders — confirming of a strengthening trend of ‘hodlers’ holding on to their BTC investments for longer. Another significant trend that came to light even before the start of the bull run was an increase of 10% in the BTC holdings of the institutional investors in the first six months of 2019.
Apart from inspiring mainstream tech companies to launch projects like Libra, the importance of digital currencies in the future financial landscape became evident with at least 19 central banks working on launching their own CBDCs. While the euphoria around the Bitcoin ETF fizzled out as U.S SEC rejected some of the applications, other innovative projects were conceived pointing to increased acceptance of the new digital asset class.
- Bakkt Bitcoin Physical Futures — a financial service platform that offered physically-settled bitcoin futures. The platform received a lot of attention since it was backed by some big industry names like Microsoft, Fidelity & ICE (owner of the New York Stock Exchange). The platform has brought the wider acceptance of Bitcoin to institutional investors and after a sluggish, trading in BTC physical futures has gathered pace in the past few months. Bakkt already has a competitor in the form of ErisX.
- Bitcoin Options — Bakkt has already added another important trading instrument to Bitcon’s trading arsenal in the shape of BTC Options based on its futures. CME (Chicago Mercantile Exchange) which started trading BTC futures in Dec. 2017 has already announced the launching of a similar product in January 2020.
- The Bitcoin Fund — A Canadian based instrument is the first regulated & major exchange-listed bitcoin fund to be approved by the regulatory authorities.
- Bitcoin Gold Derivative — An innovative trading product that allows its users to trade the precious metal against Bitcoin. Clients can trade an ounce of gold priced and settled in bitcoin.
- Bitcoin IRA — First-ever self-directed digital asset IRA (Individual Retirement Account.
Highest Transactions Recorded
It was a busy year for the Bitcoin blockchain network as it processed more transactions than any other year with May 2019 being the busiest month ever for the BTC network, processing almost 12 million transactions — beating the previous record of over 11 million transactions processed when BTC peaked around $20,000 in December of 2017 (top chart above).
Transaction Volume Peak
Higher transactions have translated into more value for the network. This means that the Bitcoin blockchain has moved more money than ever before. The highest amount of money moved was on a single day in July worth over $4 billion, coinciding with an exodus from derivatives exchange BitMEX. While this might have been an anomaly, regular spikes over $2.5 billion point to BTC network getting busy as a money exchange medium (middle chart above).
Hash Rate Highs
Hash rate is the amount of computing power miners are willing to dedicate to processing transactions. While the off late price decline in BTC means lower profitability for miners, their commitment towards dedicating such resources to the Bitcoin network continues to be robust as evident from the bottom chart above. While there have been a few scares with sudden drops in hash rate over the year, the hash rate has continued to grow throughout 2019.
Overall, it has been a pretty good year for Bitcoin in particular with wider market acceptance and the introduction of innovative trading products. Although there has been a recent market decline in price & trading volumes, the fundamental factors point a brighter future for Bitcoin & the general crypto industry.