The value of one bitcoin hit $20,000 on Wednesday, after a two-month climb that saw the cryptocurrency’s value double, marking the first — some say second — time in history it has reached the all-time high.
Bitcoin trades on different exchanges, which creates confusion as to whether this is the first or second time it has reached $20,000. But while crypto enthusiasts may differ on the all-time high, they agree that the digital token’s record run shows bitcoin has legitimacy.
“The fundamentals are the same as in 2017, but the opportunities for making bitcoin more expressive are far greater than the last big bull run that got it to $20,000,” said Matt Luongo, CEO of Thesis, a crypto venture builder that focuses on products that “bring utility” to bitcoin, such as Fold, a Visa credit card that lets holders earn rewards in bitcoin.
The last time bitcoin mania was at its peak was in December 2017 when the cryptocurrency hit $20,000. In the following months, bitcoin had wild swings, with the value dropping as low as $5,500. Janet Yellen, who was chair of the Federal Reserve at the time and who is now President-elect Joe Biden’s pick for treasury secretary — warned then that the cryptocurrency was a “highly speculative asset” and not a “stable store of value.”
This time, experts say a better market understanding of bitcoin, more mainstream adoption and a desire to use cryptocurrency as an inflation hedge make this bull run different than the 2017 bubble.
“The bitcoin narrative about scarce digital gold is growing, especially with the uncertainty around the stimulus environment,” said Rob Paone, who runs the YouTube channel “Crypto Bobby” and is the founder of Proof of Talent, a blockchain recruiting firm.
“Bitcoin and other cryptocurrencies are becoming a must-have for some of the traditional players,” Paone said. “Square has been successful adding it [to its app] and other companies have taken note and added it to their platform, most notably PayPal and Robinhood. It’s table stakes — and a lot of companies are looking at this like they are missing out if they are not adding it to their portfolio of products.”
“Bitcoin is now table stakes: Companies are looking at this like they are missing out if they are not adding it to their portfolio.”
While mainstream financial platforms helped popularize some volume of retail trading, Luongo said the market is also seeing “significant, high-conviction plays from large funds and even CEOs of publicly traded companies,” which make this 2020 run different than the last.
“Names like Guggenheim Partners, Paul Tudor Jones, Stan Druckenmiller, and the recent support from Michael Saylor at Microstrategies and Jack Dorsey at Square and Twitter are telling,” he said.
S&P Dow Jones also announced this month that it will launch cryptocurrency indices in 2021, paving the way for cryptocurrencies to become more mainstream investments.
Beyond the swing of high-profile supporters, there isn’t a way to tell who is buying bitcoin. However, the number of new bitcoin addresses, the unique identifiers where the assets are sent, recently hit a record of 25,000 per hour for the first time since January 2018, according to data intelligence firm Glassnode.
Both experts said one major factor driving the bull run is the uncertainty around the current economy and a lack of stimulus.
“In 2017, we saw a bitcoin bubble. In 2021, I expect we will see another. But, unlike the last, the alternative financial system has grown tremendously. We’re beginning to see real, parallel economic activity outside of trading, commerce and credit facilities,” Luongo said. “This growth represents real adoption, and it won’t disappear when the next bubble bursts.”