What a year 2020 was for bitcoin investors. At its lowest point, the price of the digital currency was 3,325 euros, but its value grew to 22,665 euros at the end of 2020. For the quick calculator, bitcoin has grown over 580% this year! In this article, we take a look at why the bitcoin price exploded in 2020.
Impact of the coronavirus
In mid-March, the entire world went into lockdown to prevent the spread of the corona virus. This caused a lot of unrest in all markets: Stocks, gold, bonds, oil and bitcoin, nothing was safe. Bitcoin dropped from 7,000 to 3,325 euros within two days.
In retrospect, that turned out to be the very best time to bitcoin to buy. Many investors still hit themselves in the head every day and mutter the words softly: if only I had bought …
To counter the negative effects of the lockdowns, the Central Banks had a plan: more money in the economy. The European Central Bank did this by, for example, buying bonds from companies and governments. The US Central Bank went a step further and sent everyone US citizens $ 1,200.
These measures had a positive effect on the prices of all financial markets. It is difficult to establish whether there is a causal relationship, but the bitcoin price began to recover. At the end of April, bitcoin was already worth 8,700 euros.
Supply will be halved
The fact that the bitcoin price could recover so quickly may also have another reason. In May 2020, the supply of new bitcoins was halved. This means that fewer and fewer bitcoins are coming onto the market and the supply is becoming scarcer. It is therefore possible that investors already took this into account in April.
In July, bitcoin came in big news, this time for the wrong reasons. The twitter accounts of many politicians and celebrities had been hacked. The reports stated that people had half an hour to transfer 1000 dollars (876 euros) in bitcoins. They would receive $ 2000 in exchange.
Companies and funds
But that same month, bitcoin also broke through the psychological barrier of $ 10,000 (8,181 euros). From then on, the good news continued to arrive.
It started with the listed MicroStrategy. Almost out of the blue, they explained to their shareholders (and thus the world) that they have converted $ 425 million in cash reserves into bitcoin. The reason? They see bitcoin as a means of defense against inflation.
Square, Jack Dorsey’s payment app, soon followed. They bought bitcoin for $ 50 million in October. From the moment MicroStrategy and Square came out that they were buying bitcoin, the stock prices of these two companies rose by tens of percent. Not surprising that more and more companies started to buy bitcoin. From that moment on, you also saw more and more investment funds buying bitcoin. Well-known billionaires, who are the head of these funds, have been positive about bitcoin in the media.
The next good news is that PayPal has indicated that they will integrate bitcoin on their platform. That means that in one fell swoop, hundreds of millions of people can access bitcoin, and all tens of millions of stores that accept PayPal can also accept bitcoin.
On Tuesday, November 24, bitcoin finally broke with the all-time highest value ever of 19,666 dollars. This course was achieved in 2017.
The bitcoin price has now risen to $ 28,400. That’s an increase of nearly $ 9,000 within a month. Most of the final sprint seems to come from large funds and companies looking to buy bitcoins. Consumer interest is also slowly starting to take off.
But because the supply of new bitcoins halved in May, the supply on the market is minimal. And as the first and most important law of high school economics goes, supply and demand determine the price. And with bitcoin, the demand far exceeds the supply.