Though the global pandemic has brought disruption to many industries the world over, the popularity of cryptocurrencies, particularly Bitcoin, has reached an all-time high.
Someone who knows a thing or two about this is Shane Neagle, the Editor in Chief of The Tokenist. He is an avid supporter of Bitcoin and decentralised finance (DeFi). Shane first learned about Bitcoin while studying philosophy and has since become fascinated by the way technology can positively impact finance — and the world.
While this year has been a horrible time for so many, things look bright for Bitcoin. Here, Shane discusses some of Bitcoin’s highlights throughout 2020.
As we leave the turbulent 2020 behind us, capturing Bitcoin’s milestones tells us much about the monetary state of the world — and Bitcoin’s future positioning.
Leaving Bitcoin’s weekly fluctuations aside, its dominance among cryptocurrencies continues to rise, with over 60% crypto market share. Ethereum may be the go-to blockchain for DeFi protocols, but it holds a fraction of Bitcoin’s market share at 11%. By the year’s end, we may end up with 80% Bitcoin dominance.
This trend mirrors a well-established phenomenon in psychology known as choice overload. If there are dozens of choices available, people tend to prioritise the most familiar one. Some may say that other altcoins are better designed with greater privacy features, such as Monero (XMR), but Bitcoin’s primacy is firmly entrenched in being the first cryptocurrency that started it all. Therefore, it had the longest time to capture the headlines to the point of becoming synonymous with the term “cryptocurrency”.
Hodlers and Wholecoiners
As people grow more accustomed to Bitcoin’s price fluctuations, the clutch of panic loses its grip. In other words, despite average data literacy remaining low, people have learned how to incorporate Bitcoin’s volatility when reading financial charts — and avoid the emotional chaos.
For this reason, the year 2020 saw a record increase of hodlers – people who hold onto Bitcoins, as opposed to selling. Moreover, whales are seeing this year as a major opportunity to accumulate more BTC. Since its halving, the number of whales – holding over 1,000 BTC – surged by 2%.
Overall, wholecoiners – accounts with 1 BTC or more – now comprise 95% of all Bitcoin addresses. In USD terms, this means that wholecoiners hold $301 billion in BTC, while less-than-1BTC accounts hold just $16 billion worth of Bitcoins.
Institutional Adoption Followed by Retail Adoption Rate
Envisioned as a separate financial ecosystem, cryptocurrencies have no infrastructure other than the internet. This plays a critical role in propelling Bitcoin as a store of value – digital gold. Therefore, it is likely that the unprecedented increase in money supply by the Federal Reserve to stave off a market crash in March caused a renewed interest in Bitcoin.
Coming out of the 2008 Financial Crisis, people’s trust in banking had already eroded, as shown in this comparative Bitcoin adoption survey. Only those over the age of 65 have shown increased trust in banks since.
Now, even some of the largest previously-bailed-out banks, such as JPMorgan Chase, openly admit that Bitcoin may supplant gold as a store of value. Considering that younger generations are far more receptive to virtual assets than physical, this is a realistic scenario which could unfold. Certainly, Bitcoin rises above gold as it doesn’t have to deal with complex operations and costs related to mining, transportation, and security — at least not in the same manner as physical gold.
Accordingly, Bitcoin adoption is rising across the globe, and the asset’s value has increased by 166% in 2020 alone. Countries affected by failed economic policies or sanctions, from Argentina and Venezuela to Lebanon and Iran, are experiencing great adoption growth. In turn, institutional investors are following through:
- PayPal and Venmo
- Square
- Microstrategy
- Mode Global Holdings
- Stone Ridge Asset Management
Either integrating Bitcoin as a payment method or as a treasury reserve asset, these major Fintech companies and investment firms have embraced Bitcoin in 2020.
Bitcoin Moving Forward
During 2020, Bitcoin broke a strong multi-year $12k price resistance in August, soon followed by breaking the $14k resistance in November. However, even in the initial stage of Bitcoin’s latest bull run, spurred by PayPal’s announcement of crypto integration, there is a noticeable lull in social media activity – previously one of the main drivers of Bitcoin’s price.
If we compare Google Trend’s interest overtime for the last five years, we can clearly see spikes in lockstep with Bitcoin’s price surges.
The absence of one in the latest BTC price surges tells us that 2020 is the year in which Bitcoin greatly broadened its footprint. With the Federal Reserve interventions, DeFi explosion, institutional investors, and matured users pushing Bitcoin’s sails, Bitcoin has expanded the space in which it exerts major price momentum.
2020 was a remarkable year for Bitcoin. While we can never truly know what the future holds, 2021 doesn’t look bad either.