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Between Bull Market and Corporate Standard

Bitcoin Year in Review 2020: Between Bull Market and Corporate Standard

2020 was also a turbulent year for Bitcoin. Corona crash, halving and the institutional run on the cryptocurrency are just three buzzwords that have been driving Bitcoiners this year. We take a look at the No. 1 cryptocurrency’s Bitcoin Investor most burning issues and find out: a paradigm shift in the financial system seems inevitable.

Quarter 1: Like the phoenix from the ashes

Out of a bumpy bear year in 2019, the cryptocurrency price at least hoisted itself above the psychologically important USD 10,000 mark within the first few weeks in 2020. Then it went sideways for a while until the crash in March put an abrupt end to the dreams of a carefree Bitcoin year. Within one week, the value of the No. 1 cryptocurrency fell by a staggering 45 percent. This event was an unprecedented damper even in the history of the volatile currency. Bitcoin then hit its low for the year at USD 5,032.

In fact, BTC recovered quite soon and was trading at USD 6,400 on 31 March this year, a level comparable to that before the crash.

If even a global pandemic cannot bring the cryptocurrency to its knees, what can? The tones from the sidelines are correspondingly bullish.

You can’t fully understand how antifragile #Bitcoin is until you see it go through a period like this- juxtaposed against such obviously rickety financial markets.

Pay attention. You’ve never seen anything like this before. Never been anything like this before.
– Travis Kling (@Travis_Kling) March 17, 2020

It is not surprising, however, that financial market crashes such as the Corona crash in March of this year also drag other asset classes with little correlation into the downward spiral. After all, sell-offs force leveraged traders to make margin calls, i.e. to inject additional capital to maintain positions. But this requires liquidity, which comes from all kinds of assets – including BTC.

Meanwhile, market observers had seen it more as a sign of resilience that the cryptocurrency had almost fully recovered after only two months.

Hodler holds the base

According to data from unchained capital, the rapid recovery is primarily thanks to hodlers, so-called „strong hands“. Most of the volatility came from UTXOs that were six months old or younger. In other words: long-established bitcoiners did not let the COVID crash get them down.

1/ What week for #bitcoin!
Let’s take a look at the HODL Waves to find out who was selling and who was HODLing. https://t.co/by2nmlXQIJ pic.twitter.com/sQcIzw3FhI
– Unchained Capital (@unchainedcap) March 17, 2020

With the stock market turmoil came central bank reactions. After all, the Corona crisis showed that central banks are all too willing to turn on the money spigot. And with that, COVID laid the foundation for the race of the narratives: Quantitative Easing (Fed, ECB and co.) versus Quantitative Tightening (BTC).

Q2: Halving heralds new bitcoin era

Bitcoin halving on 11 May was the dominant theme of the second quarter of 2020. With the genesis of the cryptocurrency, the supply schedule, i.e. the algorithmically determined issuance of new coins, was predetermined until the year 2140. But instead of bringing fresh Bitcoins into the system at a steady inflation rate, Satoshi has opted for an increasingly deflationary issuance of the coins. Approximately every four years (after 210,000 blocks have been mined), the number of coins miners receive for successfully propagating new blocks is halved. This means that Bitcoin’s inflation rate is getting lower and lower.

On 11 May 2020, the time had come: at 21:23 our time, AntPool found block 630,000 and, for the first time, collected only 6.25 BTC instead of 12.5 BTC as a reward.

Previously, f2pool had provided block 629,999, i.e. the last block of the third halving epoch, with a message that brought back memories of the Genesis block.