Bitcoin is predicted to have a big bull run in 2020 —but is that just wishful thinking? Although it had a bull run in 2019 and has recovered from its low below $4000 in December 2018 to its price, as of this article’s publishing, to above $9000, investors HODLing Bitcoin may still feel that the dawn after a long crypto winter is dragging on far too long.
Let’s take a look at some of the key indicators, predictions, and possibilities for Bitcoin in 2020.
The Current State of Bitcoin
When making decisions about whether or not to invest in Bitcoin or other cryptocurrencies, it’s important for investors to look at what has happened with the cryptocurrency over the past few years, why it happened, and what’s happening next.
Anyone keeping track of Bitcoin for the past few years most likely remembers the bull run of 2017, during which the cryptocurrency reached an all-time high of nearly $20,000. Much of that bull run was fueled by ICO hype and people who hoped to benefit in the short term from jumping on the bandwagon.
After the ICO bubble popped, the price crashed in early 2018 and much of the hype died down. Bitcoin then went through a period of industry growth and restabilizing, and has since gained the interest of institutional investors, corporations, and governments. As a new market and industry, it’s expected that cryptocurrencies will see some turbulence and take some time to establish credibility.
At the end of 2018, Bitcoin went through what is called a “shakeout period” in Industry Life Cycle Analysis.
All types of assets go through shakeout periods following their initial introduction to the market. During this period investors who aren’t experienced or aren’t invested for the long term sometimes sell the asset, causing it to go down in value.
The shakeout period is a sign of the industry maturing; although growth slows, companies focus on reducing expenses and establishing themselves for long-term success. Once the price is lower, experienced investors buy the asset at the lower price. At the end of 2018, Bitcoin went through a shakeout which lowered the price.
2019 was a fairly good year for cryptocurrency investors, although the industry was still in the consolidation and maturity phase and not seeing huge growth. Bitcoin saw a bull run all the way up to $13,880.
But this bull run was not the same as the run of 2017, because this time institutional investors were buying in and it wasn’t fueled as much by hype. In the fourth quarter of 2018, hedge funds invested $1 million into crypto investments. Just a few months later that number rose to $24 million.
Facebook also announced its Libra cryptocurrency project in 2019, which contributed to the Bitcoin bull run. However, when many of the main supporters of the Libra project backed out and the US Congress questioned Mark Zuckerberg about regulatory concerns regarding the project, Bitcoin’s price declined to between $6,000 and $7,500 throughout the second half of the year.
Although there were some ups and downs in 2019, by December Bitcoin’s price was double what it was at the start of the year. Looking ahead, the Libra project is still in the works, China has made commitments to investing in blockchain technology, and other indicators discussed below also show positive signs for the blockchain industry and for Bitcoin.
What Determines Bitcoin’s Price?
Numerous factors affect Bitcoin’s price, and since it is a global currency the market can be affected by events around the world. No central actor determines Bitcoin’s price; it’s set by the market. The price can also vary from one exchange to another.
The main factor that determines Bitcoin’s price is whether investors want to buy or not. If good news comes out about Bitcoin or other cryptocurrencies, or bad news comes out about another type of investment, that can cause people to buy Bitcoins and hike the price up.
Conversely, bad news about cryptocurrencies can cause people to sell. News doesn’t necessarily have to be overtly negative to spook the market, either.
If news comes out that a government hasn’t made a decision about how to regulate Bitcoin, that can be viewed as bad news. Some types of news that can negatively affect the market are projects shutting down and hacking events.
Similarly, the rules of supply and demand affect the Bitcoin market. Only 21 million Bitcoins will ever be created, and if investors see a strong long-term market for Bitcoin, they want to own a piece of the pie.
Events like the past halving event (discussed more below) can remind people of Bitcoin’s scarcity and give them FOMO.
The Altcoin Market
Although Bitcoin is the best known cryptocurrency, there are thousands of other altcoins available on the market. When good news comes out about other projects, investors sell off some of their Bitcoin to purchase altcoins.
Also, new projects offer ICOs which can sometimes have a high return in a short amount of time. If a promising ICO comes to market, it can draw attention away from Bitcoin.
Both large financial institutions and individual investors can have an effect on the market. Some Bitcoin holders, known as “whales,” own a significant enough amount of Bitcoin that they can move Bitcoin’s price if they make a large purchase or sale.
There have been cases of whales causing the market to temporarily crash when they sold off large amounts of Bitcoin.
Cost of Production
The main costs associated with producing Bitcoins are electricity and mining equipment. Although Bitcoin is a digital currency, it must still be mined. The way Bitcoin is designed, only about one block of Bitcoins can be mined every ten minutes.
If more miners join the network, the more competitive mining becomes, which makes the cost of producing each Bitcoin more expensive. Miners have to invest in new, faster equipment and are less likely to receive a pay out. These costs have an effect on Bitcoin’s price.
Each country has different definitions and regulations for Bitcoin and cryptocurrencies. When news comes out about regulatory decisions, it can cause investors to buy or sell. It is important to note that cryptocurrency is currently unregulated.
Fiat Currency Crises
Bitcoin has become the preferred currency for many people around the world who may not have access to banking, or who are living in a country going through a fiat currency crisis.
In Venezuela, for example, Bitcoin’s popularity has grown as inflation and sanctions have resulted in the devaluation of the Venezuelan Bolivar.
What’s Holding Bitcoin Back?
A few factors have been holding Bitcoin back from seeing any significant growth over the past year. Some of these are predicted to take steps forward in 2020.
Adoption and Use
Since Bitcoin is a new technology, it takes time for companies to build up tools and use cases for it. At this point, the infrastructure is getting stronger and it’s easy for novice investors to buy and sell Bitcoin at the touch of a button.
However, many people holding Bitcoin haven’t wanted to use it for everyday purchases because they view it as a long-term, safe-haven investment with a lot of potential upside. It should be noted that investing in Bitcoin and other cryptocurrencies is inherently very risky given the historic large price movements over short periods of time.
There also weren’t many retailers who would accept Bitcoin. Now, you can use bitcoin or other cryptocurrencies at Starbucks, Amazon, Nordstrom, and countless other retailers.
In June 2019, the number of daily active Bitcoin wallets hit a new high of 1 million, meaning more and more people are transacting with bitcoin each day.
Lack of Clear Regulation
Experienced investors tend to be very careful about what they invest in. If an asset doesn’t have clear legal regulations, they may not choose to take the risk of investing in it.
Regulations still are not clear with cryptocurrency, so that could be an important consideration for investors.
Waiting on Institutions
If large corporations start holding some of their wealth in Bitcoin, or financial institutions demonstrate support of cryptocurrencies, that adds legitimacy, which could drive new investors to the market.
A survey completed last year by Fidelity Investments found that 22% of institutional investors already own digital assets like Bitcoin.
47% of respondents said that they could see a place for digital assets in their portfolio, and 40% said they are open to the idea of adding digital assets to their portfolio within the next five years.
This growing interest will have an effect on Bitcoin’s price in the coming years.
What will happen in 2020?
This year presents an interesting combination of both global events and cryptocurrency-specific happenings.
The Halving Event
The Bitcoin network is maintained by a vast global network of miners, who both generate new Bitcoins and keep the network running by verifying transactions. In return for running the network, miners receive rewards.
Bitcoin is a deflationary currency, meaning there will only ever be so much of it in existence—21 million Bitcoins—and the number of new Bitcoins released into the market decreases over time. Due to this design, the number of Bitcoins miners receive as rewards decrease over time.
About every four years, a halving event gets triggered which reduces the mining rewards by half. There will be 32 total halving events, at which point all the Bitcoins will have been issued. The last halving event happened on May 11, 2020, it reduced the number of coins issued per block from 12.5 to 6.25. The next halving event is likely to happen in 2024. Previous halving events have triggered upward motion in Bitcoin’s price.
Following the first halving in November 2012, the price of Bitcoin went up 1700% . After the second halving in July of 2016, the price rose 2890%. Prior to both halving events the price also went up 500% and 200%, respectively.
Since June 2019, Bitcoin’s price has been on the rise, which may partly be due to the upcoming halving event in May.
Like any resource or asset, Bitcoin’s value is related to its scarcity. Many investors are likely not aware of the upcoming halving event, so when the event triggers it is likely to create FOMO and cause people to buy.
The US Economy
The United States is facing a number of major unknowns this year. With the upcoming election and persistent rumors, indications, and predictions that a recession is just around the corner, how will all of this affect the price of Bitcoin?
Some economists believe that a US recession will be rocket fuel for a Bitcoin bull run. If investors lose faith in the US dollar and the stock market, they may turn to the cryptocurrency market as a safe haven.
Since Bitcoin is a global currency, it can potentially ride out individual national economic crises and be that safe haven. However, if a recession hits, money might become tight, causing people to sell their Bitcoins.
Key Technical Indicators
Technical indicators that have been historically accurate are signaling that Bitcoin is heading towards a bull run. Bitcoin has been reaching higher lows as well as other positive trends.
However, technicals are not always trustworthy predictions. Depending on how you combine charts and analysis, the market can also look like it’s heading towards a downward spiral.
At the recent World Economic Forum event in Davos, Switzerland, the WEF announced plans to create a global consortium for governing cryptocurrencies. Within an hour after this announcement, Bitcoin’s price rose from $8200 to $8455 .
It may take some time, but regulatory bodies are moving towards new regulations for Bitcoin, which will help on the fence investors decide one way or another whether they will buy the cryptocurrency.
When news of escalations between the US and Iran hit last month, Bitcoin’s price spiked 5%. Along with gold, Bitcoin is now seen by many (although not all) as a safe-haven asset.
It’s possible that Iranians are also buying up Bitcoin in anticipation of troubled times ahead. As the situation in Iran unfolds, along with the ongoing trade war with China, Bitcoin’s price is likely to be affected one way or another.
Stablecoins Around the World
Numerous countries are considering developing or already working on their own digital currencies and stable coins. Russia, France, China, and other nations have all announced plans to enter the digital currency market.
As these projects progress, they could add legitimacy to the market. Bitcoin’s price may go up in the short term as these announcements come out, but whether its value will hold in the long run as the world transitions towards digital currency has yet to be seen.
The African Market
Bitcoin adoption is quickly spreading across Africa and is expected to continue to do so in 2020. Bitcoin offers a financial tool to Africans who don’t have access to traditional banking, and it can be appealing to people living in countries with unstable currencies.
Last year, JP Morgan launched their own token, JPM coin. Fidelity is planning to launch cryptocurrency trading for institutional investors. These types of actions add legitimacy to the industry and also raise awareness about Bitcoin and other cryptocurrencies.
Of course, Bitcoin is not the only game in town and other players are giving it a run for its money.
Bitcoin has not yet reached $10,000 this year and its 40% rise in value is being passed by other major cryptocurrencies. The second and third-most-valuable cryptocurrencies Ethereum and Ripple are up 60% and 47%, respectively.
The largest gain of any cryptocurrency was made by an offshoot of the original bitcoin—bitcoin SV, which has seen a gain of 209% this year alone.
Other top-rated cryptocurrencies that might give Bitcoin a run for its money in 2020 are Bitcoin Cash, Litecoin, and EOS. Binance Coin and ChainLink, both in the top 20 cryptocurrencies, are also stiff competition in the cryptocurrency world.
Binance Coin’s price has increased almost 65% in the last month, while Chainlink has seen an 89% rise in the last month and nearly a 500% rise in the past year.
For investors interested in the world outside of fiat currency, there are other players in the cryptocurrency game besides Bitcoin.
As is the case with any investment, it’s crucial for investors to do their own research and take expert predictions with a grain of salt. The cryptocurrency market is still in its infancy, so there isn’t much data to go on when making predictions, and unpredictable circumstances can have significant effects on the market.
Bitcoin could potentially be a risky investment and should be treated as such. Investors should consider making their own decisions about their level of risk based on a proper analysis of all the various factors that come into play.
The past is not a prediction of the future, and just because trend lines indicate a bull run is coming doesn’t mean they’re correct. In such a complex, fast-changing market, it’s important to stay informed and do due diligence.
Building Your Portfolio and Keep Track of the Market
2020 is looking to be an eventful year for Bitcoin and cryptocurrencies. For keeping track of the market, buying crypto, or just desiring to stick to a more traditional portfolio of assets, there are helpful tools available for achieving those goals.
SoFi Invest® offers a full suite of investment tools right at users’ fingertips. Using the SoFi app, users can trade stocks online, set budget goals, and read up on the latest news.
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