Even though the world was melting down, 2020 was actually a very bullish year for Bitcoin. Public companies put BTC on their balance sheet, famous investors praised it and the rapid price appreciation showed that there’s a lot of demand for digital gold.
In this article we’ll consider five of the most bullish things that happened to Bitcoin in 2020, starting with MicroStrategy’s decision to buy BTC to protect the purchasing power of their cash reserves.
1. Michael Saylor Puts Bitcoin on MicroStrategy’s Balance Sheet
MicroStrategy buying $425 million worth of Bitcoin is easily the largest story of the year. It’s not just the purchase that matters, it’s the fact that the purchase set a strong precedent for other companies to follow. MicroStrategy proved that a publicly traded company can hold BTC as an inflation hedge.
Michael Saylor, the charismatic CEO of MicroStrategy, will go down in Bitcoin history as a visionary. The fact that Saylor put 100% of MicroStrategy’s cash reserves into Bitcoin, not 2% or 10%, is what makes the story so epic. Saylor literally bet the company on BTC which, as it turns out, has proven to be a very profitable bet. Since the announcement the company’s stock price has gone up by more than 300%.
2. The Explosive Growth of DeFi
You’ll never hear a Bitcoin maximalist admit it, but the explosive growth of DeFi on Ethereum has been good for Bitcoin as well. No crypto asset exists in a bubble, and a rising tide lifts all boats. DeFi brought in tens of thousands of new crypto users and inevitably some percentage of them also bought Bitcoin for the first time.
More to the point, in 2020 we witnessed exponential growth in the amount of Bitcoin locked up on Ethereum. There are several different types of wrapped Bitcoin, but the most popular token is WBTC. Thanks to a substantial uptick in demand, WBTC now has a $4 billion market cap and is the 13th largest cryptocurrency globally.
By wrapping their Bitcoin, investors can do all sorts of exciting things that you can’t do with normal BTC.
Investors can deposit WBTC in lending protocols to earn interest on their deposits. They can use WBTC to collateralize loans or trade WBTC for other assets on one of Ethereum’s many decentralized exchanges. Wrapped Bitcoin creates all sorts of new ways to use Bitcoin, which increases the demand for Bitcoin. We’ve even written an article discussing how Ethereum could ultimately be one of the best ways to scale the otherwise congested Bitcoin network.
As DeFi continues to expand in 2021, look out for an increased demand for WBTC (which means more demand for BTC, since BTC backs WBTC).
3. Paypal Adds Support for Crypto
PayPal’s announcement that they would allow their users to purchase cryptocurrency is one of the most bullish news items to happen to Bitcoin in all of 2020. Worldwide there are 305 million active PayPal users. While only Americans can use PayPal to buy Bitcoin for now, PayPal has stated that they have plans to open the service internationally before too long.
The PayPal news is a big deal because it makes it that much easier to buy crypto. Instead of having to register for an exchange, upload a picture of your passport, submit your banking details, etc. You can just log into PayPal and have your BTC in a few seconds.
Furthermore, some people don’t trust cryptocurrency exchanges like Coinbase or Kraken, but they do trust PayPal. That’s a whole subset of investors who will only invest in crypto because they can do it through a trusted platform like PayPal.
The downside of the PayPal deal is that investors can’t withdraw their crypto from the platform. However, we think that PayPal might enable withdrawals at some point in 2021. Fingers crossed for that!
4. PTJ and Stanley Druckenmiller Endorse Bitcoin
Paul Tudor Jones (PTJ) and Stanley Druckenmiller are two of the most successful investors in the world. Neither one of these two legends is in the habit of buying into scams, or buying assets that they think might drop in value.
So it was very bullish for Bitcoin when both investors publicly proclaimed that they believe in the orange coin. PTJ called it the fastest horse in the race, and Druckenmiller said that although he’s holding both Bitcoin and gold, he expects BTC to go up faster.
The most important aspect of these two Wall Street stalwarts backing BTC is that it normalizes the investment and forces other investors to take a second look at Bitcoin. Investing is a challenging game and nobody wants to get left behind. If PTJ and Druck are into Bitcoin, it paves the way for every serious investor to at least consider the asset class.
5. The Bitcoin Halvening Kicks off a New Bull Market
Since time immemorial, the Bitcoin halvening has been the supply shock that leads to a new bull market. In the most recent halvening the block reward was cut from 12.5 BTC to 6.25 BTC.
Although there’s often a small runup in price, the actual day of the halvening isn’t much of a catalyst for price. The real magic typically happens 6 to 8 months later, once the reduced supply has a chance to affect the market. A delayed price increase is what we saw in 2016 and it happened again in 2020. The Bitcoin bull market kicked off sometime around November, six months after the halvening.
The halvening is bullish for Bitcoin because it’s a fundamental driver of price action. Fewer BTC hitting the market means that even if demand remains steady, price has to go up to meet that demand.
So the halvening is our final piece of bullish news for Bitcoin in 2020, since it kicked off the bull market that we’re all currently enjoying. As of January 2020, BTC is hovering around $35,000. Even if that’s down a bit from $42,000 it’s still pretty incredible! Bitcoin is showing the world what it’s made of, and this bull run is only just getting started.