Much was said about Bitcoin and its performance going into 2020. The asset made significant waves last year, climbing out of the bear market that crushed 2018 to become the best-performing investment asset in the world.
By the end of 2019, Bitcoin was recognized as the best-performing asset of the last decade. It posted better returns than any stock, government bonds, and other traditional assets. Alternative and hedge-based assets like gold and oil were unable to beat the leading cryptocurrency's performance as well. Everything bowed before Bitcoin, quite literally.
The Road Here
With such fanfare, it was a question of whether Bitcoin would be able to keep this up. Some believed that the cryptocurrency would continue on its impressive run and break new grounds in 2020. Others felt the asset would crash, essentially proving that it was a bubble once and for all.
Needless to say, those in the former category turned out to be right.
On the first day of 2020, Bitcoin traded at $7,194. It quickly rose, breaking the $10,000 barrier in February. Today, the leading cryptocurrency is holding on to a price peg above $25,000, beating some of the analysts' wildest expectations.
It is worth noting that Bitcoin's journey hasn't been smooth too. The coronavirus hit the asset pretty hard – like every other asset. When the virus got declared a global pandemic in March, its effects took a toll on everything. Companies shut down, economies stuttered, and unemployment went through the roof.
For Bitcoin, the coronavirus pandemic meant its price dropping to $4,900 in the middle of March. Suddenly, all the hype and momentum were gone, and it looked like the pandemic was going to force Bitcoin back to the depths of 2018's crypto winter.
So, it is worth noting a few reasons that propelled Bitcoin to the heights it is now and what could come next.
Institutions Showed Up in 2020
The primary reason for the growth in Bitcoin's price has been institutional interest. Generally, there are two types of crypto investors – retail (ordinary individuals) and institutional high-net-worth individuals and large companies).
When institutions make purchases, they do so en masse. These people and companies also have the most to lose when it comes to market downturns. With the coronavirus giving the stock market a beating and governments set to affect monetary policy, currencies were weakening, and investors ran to safe-haven assets. Bitcoin was the clear choice.
The largest institutional investor this year has been MicroStrategy, one of the world's largest business intelligence companies. The firm announced on August 24 that it purchased 21,454 BT for $250 million. A month later, it bought another 16,796 BTC for $175 million.
MicroStrategy's purchases have extended since then. This month, the Virginia-based firm announced that it had sold $650 million in convertible senior notes. The proceeds will help finance another round of Bitcoin purchases.
All in all, MicroStrategy has purchased over $1 billion in Bitcoin. Other companies have made similar moves. Square, a payment processor, announced in October that it bought 4,709 BTC, worth $50 million. The Wall Street Journal also reported this month that MassMutual, a Massachusetts-based insurance firm, purchased $100 million in Bitcoin.
There are many other stories of companies making a move into Bitcoin. This surge in purchases implies that the asset continues to seem like a legitimate asset. With recognition from Wall Street veterans and more, Bitcoin is on the path to fulfilling its potential.
Retail investors Are Surging Too
Along with the institutional investment, Bitcoin is also getting love from the retail side. Many who invest in the asset see it as a get-rich-quick scheme and are trying to avoid the Fear of Missing Out (FOMO). With that in mind, they open accounts and purchase units of the leading cryptocurrency.
However, many new users also believe in Bitcoin. These people can't be discounted. With their long-term belief, Bitcoin should be able to weather any storm in the interim and hold on to its price peg.
What the Future Holds
There is little doubt that Bitcoin will keep breaking ground on its way forward. Beyond the fact that it is riding a significant popularity wave, it is also about to get more useful. In October, PayPal, arguably the world's largest payment processor, reportedly announced that it would integrate Bitcoin into its core service.
PayPal is a service with 361 million active users. By integrating Bitcoin, the company will allow these users to spend the cryptocurrency at any of the 28 million merchant stores that use it. This means that Bitcoin will be more available and ready to spend. The increased utility should help the asset's adoption – and, by extension, its price.