Blog: Year of cryptocurrencies 2020
The year for cryptocurrencies was very bullish and eventful. The year 2020 remembered above all for the sharp collapse of the market caused by the coronavirus and the subsequent sharp rise in prices, the third halving of Bitcoin’s history, the rise of DeFi services, the entry of institutions and large investors, and most recently Bitcoin’s new ATH. This article aims to present the most significant events of this year in cryptocurrencies.
The beginning of the year in the cryptocurrency market- the corona panic and the third halving of Bitcoin
The year for cryptocurrencies started on a positive note. Cryptocurrency rates were on a nice rise, and the halving of Bitcoin in May raised people’s optimistic expectations. Previous halvings had always led to the beginning of a new boom, which was expected to happen again this time.
In March, the cryptocurrency market began to happen. The coronavirus began to spread. As a result, investor panic was reflected in every asset class. The cryptocurrency market fell sharply behind the stock market. As a result of the decline, cryptocurrency exchange rates decreased by tens of percent. Investors will certainly remember the market panic caused by the coronavirus for a long time to come.
As a result of the corona panic, Bitcoin’s price plummeted from more than 9,000$ to nearly 3,600$. The decline caused by the corona panic was completely exceptional in the history of Bitcoin and the entire cryptocurrency market. It can be said that in March, the market was momentarily experiencing real apocalyptic times.
The crisis caused by the corona panic did not last long in the investment markets when central banks decided to intervene in the game. Central banks worldwide began to release huge stimulus packages that saved the investment market from a major carnage. Indeed, the central banks’ exceptionally generous stimulus policy led to a cryptocurrency market, and other investment markets rise again. Due to the massive stimulus packages, investors worldwide have begun to focus more on Bitcoin and its unchanging monetary policy.
Although the collapse of the cryptocurrency market was sharp, it was quickly over. Indeed, the exchange rate of Bitcoin was steadily rising before the most anticipated event of the year in the cryptocurrency world, namely the halving of Bitcoin.
Bitcoin halving is a feature programmed into the Bitcoin blockchain that aims to keep bitcoins’ total amount stable and prevent inflation. The halving of bitcoin results in a decrease in the number of new bitcoins released into circulation daily. As demand remains the same, the value of each bitcoin already on the market should also increase. Investors’ optimistic expectations about the halving are rooted in Bitcoin’s previous halvings. Bitcoin’s first two halvings led the bitcoin price to a sharp rise, and Bitcoin’s previous two price peaks have both been reached about 1.5 years after the previous halvings.
The third halving of Bitcoin’s history, like previous half-lives, launched a new four-year price cycle. The price of Bitcoin has been on the rise since the halving, and we look forward to what the price peak of this cycle could be.
Summer in the cryptocurrency market - PayPal and the rise of DeFi services
In June, there were again strong signals of interest from large institutions in cryptocurrencies. At that time, it revealed that payment service giant PayPal was planning to add cryptocurrencies to its service. Later in the fall, PayPal’s plans finally saw the light of day, and today, through PayPal, it is possible to buy, sell, and store various cryptocurrencies. PayPal offers more than 350 million people an easy and natural path to the world of cryptocurrencies. PayPal’s entry into the cryptocurrency market is just one indication of the increased interest of institutions.
Although 2020 was a strong year for Bitcoin, we also experienced substantial price increases for some altcoins in the summer. In the summer, the market also experienced a small-scale altseason, strongly concentrated around DeFi (Decentralized Finance). Indeed, the prices of several DeFi services rose sharply during that time.
DeFi was definitely one of the most significant topics of conversation in the world of cryptocurrencies in 2020, and it will probably be so next year as well. DeFi is a digital revolution, which will change the way we use banking services in the future. In practice, DeFi means that traditional financial services are brought on a decentralized blockchain, eliminating the need for third parties such as banks.
End of the year in the cryptocurrency market - Institutional investors and Bitcoin’s new ATH price
The end of the year of cryptocurrencies has been exciting and has included several significant events. Institutional interest in Bitcoin has accelerated throughout the year. One outstanding example of this happened in September when a NASDAQ listed company called MicroStrategy exchanged substantial sums of its cash for Bitcoin. MicroStrategy’s purchases are not limited to this one time, and the company has acquired more bitcoins for itself throughout the fall.
MicroStrategy’s entry into the cryptocurrency market has also reinforced a view of Bitcoin as a trusted custodian. More and more listed companies will likely be interested in Bitcoin and its unique features in the coming years.
In addition to MicroStrategy, numerous other large institutions have acquired bitcoin for themselves over the past year. One of the many reasons for the increased interest of institutions in bitcoin is the generous corona stimulus packages of central banks. Many have found that the path chosen by central banks can in no way be sustainable and that Bitcoin’s unchanged monetary policy is something that other asset classes cannot offer. The interest of institutions and large investors in Bitcoin is continually growing.
We also heard positive news from Ethereum, the second-largest cryptocurrency in the market. The first phase of the long-awaited Ethereum 2.0, finally launched in December. Although the completion of Ethereum 2.0 will take years, the first phase’s launch can still be seen as a significant milestone for the project.
Ethereum 2.0 will solve Ethereum’s network capacity problems. In practice, Ethereum’s network capacity problem means that popular, high-transaction applications take up significant capacity from Ethereum’s network, which can slow down network performance. In addition to the slowdown in the network, the increased transaction fees for Ethereum’s network have also caused problems this year.
The Bitcoin course tried the 20,000$ milestone several times. Finally, bitcoin reached a new ATH price in December, and since then, the price has remained above 20,000$. It will be interesting to see where the price peak for this current four-year price cycle will be for Bitcoin. The increased interest of institutions and large investors in Bitcoin, combined with Bitcoin’s declining supply, promises good for bitcoin’s price.
Overall, the year 2020 was very eventful for cryptocurrencies. Cryptocurrencies have taken giant leaps forward. World’s largest cryptocurrency, Bitcoin, has also begun to consolidate its position in large institutions and investors’ portfolios. Bitcoin and other cryptocurrencies’ potential is becoming more widely recognized, and the infrastructure built around them has evolved considerably. It will be interesting to see what the year 2021 will bring.Mikko Soon Cryptocurrency specialist