2020: The Year Bitcoin Came of Age

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There will be no shortage of comment during the rest of this month concerning the extent to which the Covid-19 pandemic impacted how we lived and worked in 2020.

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Exponential Growth Of Bitcoin In 2020

But the transformation of the cryptocurrency market in 2020 should not be overlooked. It is fair to say that the most notable movement in the cryptocurrency market in 2020 was the exponential growth of Bitcoin. Earlier this week the value of Bitcoin exceeded $20,000 against the US dollar.

The price of Bitcoin is up over 400% since March following the market meltdown in the wake of the coronavirus outbreak which decimated both the traditional financial markets and the cryptocurrency markets.

And yet cryptocurrencies recovered quicker than other financial sectors, sending out the message loud and clear that the digital asset space is getting stronger, not weaker.

There are several factors for this but they are all largely related to the havoc that the Covid-19 wreaked upon the global economy. The decline in economic activity and the reduction of contact throughout 2020 caused unprecedented financial crisis in conventional markets. Even the price of gold- considered a classic safe haven- fell substantially in the spring.

What Fueled Its Fast Growth?

Investors quickly needed new safe haven assets to preserve their capital. Increasing attention was paid to Bitcoin by institutional investors and their funds fuelled Bitcoin’s fast growth. As the digital asset climbed higher, greater global media coverage helped spread the word to a wider audience, at both a retail and institutional level.

While 2020 undoubtedly threw up operational and logistical challenges for cryptocurrency exchanges, firms like CEX.IO, of which I am executive director, have been incredibly busy in recent months. This year CEX.IO launched a cryptocurrency-backed loans service and opened up its broker trading platform to the public, among other initiatives.

Against the backdrop of uncertainty and turbulence that defined 2020, there were numerous significant examples demonstrating how institutions are turning to crypto as a store of value. Whether it was PayPal’s announcement of its support service for Bitcoin payments or hedge fund titan Paul Tudor Jones revealing almost 2% of his assets were in Bitcoin, the bullish cryptocurrency price swings were powered by frequent signals that digital assets continue to consolidate their presence in financial markets.

The Digital Assets Space Will Become Less Volatile

As the number of institutional investors turning to cryptocurrency as an alternative investment asset increases, the digital assets space will become more mature and less volatile. And cryptocurrency exchanges will continue to innovate and grow to take advantage of increasing demand.

Expect the upwards trend in crypto to therefore extend into 2021 after the disruption caused by Covid-19 has been lessened. The recent surge in Bitcoin is not another bubble but a permanent market shift with cryptocurrencies entrenching as a fully-fledged investment asset class.

As for this year, 2020 will of course be principally remembered for other reasons than the price of Bitcoin. But recent months have supplied definitive proof that the cryptocurrency market has shed its unchecked ‘Wild West’ reputation and will not be heading south anytime soon.