There is little doubt that the fortune is smiling once again upon bitcoin and the rest of the cryptocurrency domain. The digital currency of the internet, how bitcoin and its BTC token are often called, had a phenomenal 2020, unlike almost anything else. With the price of a single bitcoin coming close to 30,000 USD on the last day of the year and then hitting 33,000 in two days, the future seems bright for this network. Other major cryptocurrencies, namely ethereum, are seeing results nowhere near those of bitcoin, but they too are seeing a steady climb in their market cap and token price.
However, as this takes place, many analysts are having a hard time providing a definite answer to what is the key element behind that price rise. Also, other traditional market experts and pundits provide insight that is both illogical and void of many technical details and facts of these networks. So, it can be more than hard for an average person to figure out heads or tails in the entire story of bitcoin success in 2020. Yet, it is possible to understand the same price and relevance progression of BTC if the issue is considered from a multitude of angels, all of which aligned in the previous year.
Established Players enter the Fray
The buildup of the bitcoin price came as notable investors from the corporate domain began putting their funds into BTC. These include companies like PayPal and Fidelity who offer some sorts of crypto service, as well as MicroStrategy, which now holds over 1.1 billion USD in BTC.
That ended up being a story about a crypto-desirable setup where ordinary users got news about where they will be able to hold and use BTC, but also that these massive companies are investing into it as well themselves. The entire message became one of bitcoin being taken very seriously in some parts of the mainstream world of corporate finance. For better or worse, that is a story that many individuals take to heart. Furthermore, it is also a story that gets the ear of other corporate and business entities that might be looking for a chance to invest their money as well.
Story of Institutional Adoption
Institutional adoption did not come overnight or on its own. Instead, years of painstaking creation and management of needed infrastructure preceded it. Today qualified custodians, massive digital currency exchange companies, and other important elements all in place for those huge institutional investment moments. Jokingly, CEO of Tesla Motors, Elon Musk, asked if it is possible to convert the entire company’s net value into bitcoin. That is not something that many exchanges would take on as a challenge, but they will and already have converted hundreds of millions of USD in business funds into BTC.
So, the story of Bitcoin adoption among big businesses is not only about recognizing opportunity and taking hold of it but also be ready and prepared for the moment the infrastructure matures sufficiently. Many companies clearly decided that this did take place in 2020. The result is the massive influx of institutional investment mainly into BTC, but there is a strong stance that other digital currencies will follow soon. Here the ethereum network is a prime candidate for the next big bush from institutions to digital currency that is not the biggest one on the planet.
While the price chart of the BTC token remains one that is steadily heading up, that is by no means assured for the coming weeks or months. Instead, the insanely high level of volatility that is synonymous with cryptocurrency trading remains in place today as much as it did a few years ago during the 2017 bull run. A lot of companies are not blind to this fact. They remain both careful and vigilant when they consider their own possibilities of transferring some of the money their company holds into digital currencies.
This means that the graph chart of bitcoin’s price can easily take a huge tumble down and erase much of the success seen so far. In fact, many day traders are hoping for this very thing to happen soon as it would allow them to once again stock up on BTC tokens. Furthermore, it is impossible to consider the possibility of the current upwards trend lasting indefinitely. Like always, however, the same notion is not truly stopping anyone from investing, no matter if they are private individuals or companies of any size.
In the jigsaw of bitcoins success in 2020, another important element is the fact that most believe the world and its major economies will see a steep increase in the levels of inflation. It is not necessary for a person to be a financial or economic expert to see a similar trend taking shape practically anywhere around the globe. Central banks, in an effort to mitigate the impact of the coronavirus pandemic and an array of financial choke points, like national lockdowns, are pumping money into the economy.
Nowhere is this point clearer than in the two biggest economies – China and the United States. In the US, financial analysts are pointing out that the Federal Reserve is in an ongoing campaign to provide fiscal stimulus to both citizens and companies. It is printing billions of dollars and pumping them into the economy, bringing down the value of the USD steady throughout the pandemic.
Also, the FED immediately cut the short-term interest rates to either zero or near that number. That means that putting money into a savings account is practically pointless at this moment in the US. At the same time, any other investment is clearly a big issue for so many individuals and entities, as they count on a soft economy in the coming year. Few believe that the US will be ready to see a strong rebound from all of this in record time. So, like in many other domains of the growingly digital world, like esports or social media, people are trying to find a hedge against that problem. Many found it in BTC and it appears that many more will do the same in 2021.