Bitcoin has had a crazy run in 2020. It has seen gains of nearly 200% since the beginning of 2019.
More importantly, it briefly broke it’s all-time high of about $19,600 earlier this week. This is great news for Bitcoin. In this article, we will cover what led to this amazing Bitcoin run, what it means for the future of Bitcoin, and whether Bitcoin is a good investment or not.
Why did Bitcoin’s price rise so much in 2020?
The exact reasons for Bitcoin’s price in 2020 are unknown. However, some interesting theories exist about why the price rose so dramatically in 2020.
Here are some of those reasons.
Cryptocurrency Always Has 3 Year Bear Markets
Cryptocurrency, and especially Bitcoin, usually has a 3 year bear market followed by a 1 year bull market.
This was last evidenced in the bull market of 2017 – cryptocurrency soared to record highs after a 3 year bear market.
Of course, that bull market only lasted about a year before quickly collapsing at the beginning of 2018.
With that track record, many investors have theorized that Bitcoin cannot sustain enough capital to have a long-term bull market.
Has Bitcoin entered the next bull market?
Only time will tell, but past bull markets indicate that Bitcoin is due for a surge in 2021.
The Holiday Season is Typically Good for Bitcoin
Another aspect not talked about much in the cryptocurrency community is that Bitcoin tends to see a price surge around Christmas and Thanksgiving.
The reasoning is, of course, unknown. However, many have theorized that retail investors enter the market around the holiday time as they might have extra money to invest in cryptocurrency.
Uncertainty About The Future of US Currency Due to the Coronavirus Pandemic
To the surprise of many, Bitcoin crashed at the beginning of the Coronavirus pandemic in early 2020. This was likely due to many losing their jobs and being forced to sell cryptocurrency, which would tank the market.
However, the price of Bitcoin slowly rose as the pandemic dragged on into 2020. The response of governments to provide income assistance may have resulted in extra money being pumped into the market.
In addition to that, the United States had a fair amount of uncertainty and internal turmoil in the middle of 2020.
For those that do not know, institutional investors dislike uncertainty.
Did the uncertainty surrounding the United States in the middle of 2020 result in institutional investors moving money into Bitcoin?
It very well might have as the price of Bitcoin surged as the economic future of the United States became increasingly uncertain.
Tether Has Inflated The Price
Finally, it’s worth mentioning that the controversial stablecoin Tether has been minting billions of dollars worth of Tether coin.
Many have alleged that the price of Bitcoin is directly tied to Tether. Basically, the allegations state that Tether prints Tether coins (worth $1/coin) and uses those coins to purchase Bitcoin in order to pump the price of Bitcoin. Of course, the allegations state that Tether does not have any fiat currency in their reserves.
Tether is, essentially, artificially printing United States Dollars in order to pump the price of Bitcoin.
Are these allegations true? And is Tether responsible for the surge in price of Bitcoin?
Well, Tether has gone from a market cap of $4 billion USD to nearly $20 billion USD in 2020. However, this does not necessarily mean that Tether is minting unbacked Tether coin.
That said, it is an interesting theory to consider. And many, many experts in the cryptocurrency community view Tether as a tool used to pump the price of Bitcoin.
What is the market cap of Bitcoin?
According to CoinMarketCap, Tether has a market cap of $341 billion at the time of writing.
This market cap is much higher than the previous all time high market cap of $330 billion of December 2017.
However, the increase in market cap can be explained partly by inflation of the United States dollar. Remember, the United States dollar has approximately 3% inflation per year.
With that said, it’s still a good sign that the market cap is increasing rather than stagnating or decreasing.
What does Bitcoin hitting a new all time high mean for the future of Bitcoin?
Bitcoin hitting a new all time high is great for the future of Bitcoin. When Bitcoin was at $4,000 in 2018, many Bitcoin detractors were saying that Bitcoin would never reach it’s all time high again.
In fact, many proclaimed “Bitcoin is dead.”
Well, Bitcoin did not die. It came back stronger than before – it just took a few years. When the price exceeded the all time high, everyone that had ever bought Bitcoin had been profitable.
There is one downside to Bitcoin’s recent all-time high.
Bitcoin has still not broken the $20,000 barrier.
That is more of a psychological barrier. But it will be a milestone when Bitcoin breaks $20,000.
Bitcoin breaking $20,000 will likely indicate the start of the next bull run.
Is Bitcoin a good investment in 2021?
In our opinion, Bitcoin is a great investment for 2021. It is ramping up to enter another bull run.
Additionally, DeFi is finally starting to deliver on the promises it made in 2017. And with DeFi, Bitcoin will rise just like Bitcoin rose in the 2017 ICO bubble.
Remember, people automatically associate cryptocurrency with Bitcoin. They are so associated that many people use cryptocurrency and Bitcoin interchangeably.
Anyway, Bitcoin does not appear to be going anywhere. It always seems to exceed the previous all time high on a long enough timeline, so you likely will not lose money.
What is the maximum price Bitcoin will hit?
First of all, no one actually knows the maximum price any investment will reach. Every maximum price prediction is just that – a prediction.
However, the future of Bitcoin looks great based on previous trends and increasing institutional interest in Bitcoin.
We, and many experts, expect that Bitcoin could reach $40,000 in 2021. And that is a conservative estimate.
Some experts predict that Bitcoin could exceed $100,000 by the end of 2021.
Where can I buy Bitcoin?
Fortunately, purchasing Bitcoin is easy. Every single cryptocurrency sells Bitcoin – some sell it for other cryptocurrency and some sell it for fiat currency.
If you have access to Coinbase, then we strongly recommend purchasing Bitcoin with Coinbase Pro. The price is good and the fees on Coinbase Pro are some of the lowest in the industry.
Binance is also a great cryptocurrency exchange if you have the ability to deposit fiat currency onto it.
But really, any exchange is fine for purchasing Bitcoin if the fees are low enough. We recommend searching for exchanges that charge less than 1% total fees. For more information, you can check our article about how to buy BTC without a fee.
Is Bitcoin safe?
Yes, Bitcoin is perfectly safe. There have not been any hacking incidents or security breaches. The blockchain is public and open-source – many audits have been done on the security and none have turned up any potential problems, so it is not likely that Bitcoin will experience any problems.
There is one caveat, though. Make sure to store your bitcoin on your own wallet. Leaving bitcoin on the exchange puts you at risk of losing it if the exchange is hacked or pulls an exit scam.
There are many wallet options available. Some are free and some are paid (hardware wallets). Cold storage is best if you plan on holding bitcoin for a long time, but it’s annoying to transfer.
A hardware wallet is the safest choice if you plan on holding a variety of cryptocurrency and transferring it to and from the exchanges.
Bitcoin broke it’s previous all time high. That’s a huge step forward for Bitcoin, and cryptocurrency as a whole, it has shown that Bitcoin can overcome massive price drops and bear markets.
The question, of course, remains whether Bitcoin can stay above it’s previous all time high from January 2018?
Past performance seems to indicate that Bitcoin is up to the task. There is certainly no indication that the Bitcoin gain train will stop on a long enough timeline.