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Starting at $7,000 earlier this year, and ending at right under $30,000, 2020 marks an almost 300% gain for the very variable cryptocurrency.
Starting at $7,000 earlier this year, and ending at right under $30,000, 2020 marks an almost 300% gain for the very variable cryptocurrency.
Bitcoin started 2020 at around $7,200 per coin. The cryptocurrency is now at almost $30,000, marking an almost 300% gain. The Nasdaq is up 43% through 2020, the S&P 500 up 16%, and the Dow ended the year with a 7% gain, all miniature compared to Bitcoin’s mammoth gains.
It took the cryptocurrency 10 years to reach $20,000, mostly buoyed by young, enthusiastic traders, focused on the decentralized nature of Bitcoin. The 15 day jump to $29,000 was brought through institutionalized investors, marking a completely different crowd investing in Bitcoin.
While newcomers definitely aren’t done investing in Bitcoin, the institutions really carried cryptocurrency. Up until this year, cryptocurrency was considered an incredibly risky, short-term investment, pushed to make a quick buck off of young investors’ wild beliefs.
That changes once institutions started piling in, the groups who acts as pillars to investments, proving legitimacy and worthiness of your investment funds. Banks and fintechs, PayPal, Square, and many others have jumped aboard the Bitcoin train, bringing the recently crashed coin into the spotlight, adding some legitimacy.
Institutional investors push forwards
According to a December 21st report from CoinShares Research, firms on Wall Street pushed a total of $5.75 billion into digital assets in 2020. That’s up 660% compared to the amount that was purchased in 2019, and that’s also during a pandemic, something that definitely wasn’t in the forefront of institutions last year.
That massive spike in investments had pushed Grayscale Investments, or GBTC (their Bitcoin Investment Fund), to over $15.3 billion in assets, much higher than last year.
According to research firm Glassnode, just 22% of existing bitcoin is available for trading, meaning that over 78% of total circulating bitcoin is owned by someone. The massive amount of funds thrown in by institutional buying has pushed the vast majority of available bitcoin out of the possibility of trading.
While that could be a good thing for the price in the upcoming year, it could also mean that volatility is much higher than this year.
Fintech and established banks joining the crowd
While countless companies and organizations are investing in bitcoin, most people associate PayPal and Square with launching the sudden 2020 rush.
PayPal announced October 21st that PayPal’s wallets and Venmo wallets would both support paying with bitcoin and investing in the cryptocurrency as well. While PayPal’s shares immediately soared, the announcement had a less apparent but longer lasting impact: a consumer payments/finance company had joined bitcoin.
Square on the other hand, has been invested in bitcoin since 2018, mostly due to its CEO Jack Dorsey. 2018 was when Square decided to add bitcoin trading to the Cash App app, which was pushed further this year. Square pushed further this year, by buying $50 million of bitcoin to keep as an investment/asset.
This seemed to work well for the company, as Square’s bitcoin revenue was up 618% to $1.63 billion, with profits up even more, at 1,500% to $32 million.
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Visa, a much more established payment company, also joined in on bitcoin, announcing a large variety of Visa-brand bitcoin rewards credit and debit cards. Adding on to that, the company announced support for Circle’s USDC stablecoin, built to remain stable and attached to the US dollar.
According to Yahoo Finance, Visa says it is actively working with “over 25 digital currency companies on a variety of bitcoin related products and services.” This could mean that Visa will expand into further categories that Bitcoin could affect, as they later mention that Visa had said “cards being just one area.”
Along with fintech companies and established vets like Visa, we also come to established banks, such as JPMorgan Chase. Despite the quite public comments of their CEO, Jamie Dimon, the company has expanded into cryptocurrency over time. JPM launched an internal token last year, followed up by providing customer transfers of cryptocurrencies from exchanges.
A long year and a big one for Bitcoin
All of the above companies and examples have all impacted bitcoin in one way or another, but there’s still dozens of other reasons behind its explosion this year. Institutionalized investors helped launch the craze, but underlying conditions, such as with the pandemic, gave it the perfect opportunity to spike.
With the Feds’ announcement of COVID related financial step-ins, bitcoin got a huge boost. While cash has to react to government interference, inflation, and quantitative easing, bitcoin is free to revolve around the dollar, loosely connected.
Dan Morehead, CEO of crypto-firm Pantera Capital said
“There’s so many uncertainties in this pandemic, but one thing that seems almost assured is when you print trillions of dollars more paper money, it’s going to drive up bitcoin and other cyptocurrencies; Gold’s going to go up, bitcoin’s going to go up. It is a hedge to paper currency being debased.”
Along with bitcoin’s external connection to the dollar, the economy’s failing conditions led more people to big funds and hedges, also pushing alternatives. These alternatives, whether they be stocks or bitcoin, can push a wider, less focused investing point of view. When you’re desperate as the economy falls apart around you, you’ll go anywhere, especially the newly endorsed and spiking cryptocurrency, bitcoin.
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