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“By now, a lot of people have heard of Bitcoin. It’s been running consistently for just over 11 years and has enjoyed it’s fair share of positive and negative media attention. Many eyes have been on Bitcoin since the bull run of 2017, with people eagerly awaiting its next big moment, and we believe that this moment is coming, especially as 2020 is shaping up to become its most significant year yet. Events impacting Bitcoin this year - the halving, proving itself as a safe haven asset, quantitative easing, businesses emerging from the crisis, regulation changes and technical upgrades - all individually have the potential to change its path forever, but all combined at once and no one is going to want to want to look away.
“First up is the highly anticipated Bitcoin halving or, as it’s recently been dubbed, the “quantitative hardening” (a play on the phrase “quantitative easing” - a tactic often used by central banks). This event happens roughly once every four years or with every 210,000 blocks mined. As the third halving event to occur, there are expectations for what might come after, with history telling us that the Bitcoin price will typically begin to rise significantly within the 12 months following a halving - something that can be simply put down to supply and demand.
“Let’s unravel how supply and demand works a little in this context, assuming some basic math for the sake of simplicity: The price of Bitcoin is currently around $7,000 and the first time we achieved a price of $7,000 was around October 2017. For the price to maintain from that point in time to today, there must have been around $400 million per month coming in to buy up the newly mined Bitcoins. After the halving in roughly 38 days, the number of new Bitcoins being created will be halved, from 12.5 BTC per block to 6.25 BTC. If the demand continues at $400 million per month (which it has done for the previous 2.5 years) it will create a standard supply and demand curve, and undoubtedly cause the price of Bitcoin to increase.
“This brings us onto the impact of quantitative easing and the $2 trillion stimulus package recently introduced by the US Federal Reserve. This printing (and potentially more to come) will highlight concerns around inflation and drive investors to look to inflation hedge assets such as Bitcoin or gold in the very near future. This also plays it’s part in highlighting to the general public how money is controlled, helping to expose Bitcoin’s 21 million finite supply as something that should not be ignored.
“Bitcoin is many things to different people, but one thing it’s often touted as is a “safe haven asset” similar to gold. During its first 10 years, Bitcoin never had the opportunity to prove itself as such, however, with the current global health crisis and the resulting economic crisis, for the first time we are seeing Bitcoin earn the recognition it so rightly deserves as a safe haven asset. During the stock market crash last month, all markets and assets performed in a similar manner, including Bitcoin. However, since then, Bitcoin has risen from it’s $4,000 low in mid-March, to just over $7,000 in a short, 3-week period.
“Our data at CoinCorner also reflects this bullish behaviour towards Bitcoin; in the last 6 years operating in the Bitcoin industry, March 2020 was our strongest March to date and our strongest month in the last 2 years. It’s also important to note that during this time, 95% of trades at coincorner.com were buys.
“As previously mentioned, Bitcoin is different things to different people, but one common use case for it is as a payment method by businesses. Until now, we have only seen strong adoption from the “early adopters” - businesses that typically fall under categories including tech-savvy, high-risk sectors or small enthusiasts looking to get ahead. However, we may be at a pivotal point in time now given the current global crisis and climate. We are already beginning to see businesses close, with others struggling to weather the storm and hoping that they can survive until some sort of normality is restored.
“Once businesses begin to restart their operations over the next month or two, it’s highly likely that they will be looking for a new, competitive edge to help attract customers back in. This opens the doors for Bitcoin to enter, bringing with it a variety of merchant benefits such as low fees, incredible settlement periods for greater cash flow and global reach, just to name a few. This is yet another knock on effect of the current global crisis that may actually help to drive people towards using Bitcoin.
“At the beginning of 2020, we were starting to see positive movements within the industry as global regulators began introducing regulations around Bitcoin companies, further cementing the belief in Bitcoin as part of our financial future. Again, the recent crisis has only helped to highlight growing confidence in Bitcoin, as well increasing demand, which will only encourage more countries to introduce formal regulation around it. In turn, this gives Bitcoin more credibility and trust, and overall, increases its value proposition.
“Technical improvements happen reasonably regularly for Bitcoin, but any significant technical upgrades usually take years - for example, SegWit was the last major upgrade in 2017. This year, we hope to see our next important upgrade since SegWit, with the introduction of “Schnorr Signatures” and “Taproot”, which, in short, will each help to continue to improve scaling and privacy. Another quietly anticipated update called “Erlay” is on the way too and this will improve the speed of relaying transactions between nodes - yet again, it’s another amazing update that we could see being implemented towards the end of 2020.
“To add to this, the industry has already made great strides after introducing the Lightning Network for instant commerce payments and Liquid for larger institute-to-institute payments. These are both still within their first couple of years of operation but continue to grow from strength to strength - certainly they are 2 key components of Bitcoin to pay attention to this year.
“Ultimately, the fundamentals of Bitcoin remain as strong as ever. As the industry continues to widen its reach day by day and with the potential catalysts above all coming together at once, we can expect to see an explosive year for Bitcoin.
“I’m not one for attempting to predict the price of Bitcoin - as with any asset, it’s a difficult task that nobody can really do with any form of accuracy - but I want to address the question people always ask: Will Bitcoin hit a new all time high in 2020? I did not originally anticipate that it would, however, with both the current unexpected global crisis and every event in Bitcoin’s pipeline over the next 9 months, we can only expect the price of Bitcoin to continue in the direction that everything is currently pointing... towards that $20,000 figure and beyond.”