2020 has been an interesting year for crypto enthusiasts all over the world. In the wake of a looming global financial crisis and pandemic, we’ve seen a huge rally in the price of Bitcoin.
Most punters have considered this rally to be the end of a 3-year long bear market that saw Bitcoin valuations consistently fall.
Prior to the 2020 rally, many speculated that it was the end of cryptocurrencies as we know it. However, strong market sentiment has seen Bitcoin valuations continually rise eventually breaching the vaunted $10,000 mark.
So now we ask the million-dollar question – what are the factors behind Bitcoin’s amazing 2020 rally and can we expect it to continue in 2021?
Let’s take a look below:
- Monetary policy
All over the world, lockdowns have forced millions of people into a state of self-enforced quarantine.
Because of this, consumption has fallen drastically which in turn has triggered fears of a global economic meltdown. In an attempt to prevent their economies from entering into a state of freefall, governments worldwide have instituted various measures to arrest the problem.
This includes massive cash injections that saw trillions of dollars entering the economy – all to further stimulate spending and keep the economy afloat.
Despite these measures, investors remained unconvinced and fears of rampant inflation have been sparked. In order to hedge the value of their assets, investors have turned to alternative investments.
As we’ve seen by Bitcoin’s spectacular performance in 2020, cryptocurrencies too are being snapped up like hotcakes. Their perceived independence i.e. lack of government regulation and decentralized nature means that Bitcoins and other cryptocurrencies are relatively unaffected by an economic downturn.
Furthermore, increasing rates of Bitcoin adoption and new crypto technology further spur a rise in Bitcoin valuations. For example, do you know there is a crypto e-wallet app with encrypted messages? Click here to know more: https://tezro.com/
- Speculative trading
With Bitcoin valuations rallying in the first half of 2020, investors have once again begun jumping on the cryptocurrency bandwagon. This situation has given rise to speculative trading with many investors hoping to replicate the wild returns on investment last seen in 2017.
As the demand for Bitcoin rises, the limited supply in the marketplaces upwards pressure on Bitcoin valuations. Thus allowing prices to increase as 2020 progresses – something which many analysts predict is set to carry on into 2021.
- The weakening of the U.S Dollar
It is no understatement to say that the United States is in a state of crisis. Divisive politics, a contentious 2020 election, and rising geopolitical tensions with China have raised more than a few concerns.
As a result, the U.S Dollar once seen as a traditional safe-haven currency has been abandoned by investors fearing uncertainty ahead. This situation has been further compounded by the loss of confidence in the United States as a world leader.
Instead of the greenback, investors have turned to Bitcoin and other cryptocurrencies this further accentuating the bullish sentiment in the crypto market.
- Successful halving
Prior to the halving, it was anticipated that the hash rate of the BTC network would fall sharply as the amount of Bitcoin rewarded to miners would fall by 50% overnight, thus causing a drastic fall in profits.
However, just like in 2020, the results have been surprising. Rather than a crash, hash rates have returned to nearly pre-halving levels – highlighting the positive Bitcoin sentiment on the market.
With an optimistic outlook for Bitcoin, investors have been given the assurance that Bitcoin remains to be a solid investment for the foreseeable future.
To conclude, fears of rampant inflation, a weak U.S Dollar, speculative trading, and a positive outlook for Bitcoin lend credence to the fact that the rest of 2020 and 2021 will be a good year for cryptocurrencies.
Disclaimer: This is a paid post. KryptoMoney does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. Readers should do their own research before taking any actions related to the company. KryptoMoney is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the article.