Bitcoin’s price surpassed $20,000 for the first time ever, a historic milestone for the world’s most popular cryptocurrency.
On December 16, the price of Bitcoin (BTC) reached $20,000 for the first time ever. The historic milestone comes just over two weeks after it surpassed its previous all-time high.
The current rise differs from that of 2017 for several reasons, which could help BTC climb even higher. These include growing institutional demand, an increasingly strong perception among investors of Bitcoin as a store of value, and stronger network fundamentals.
Institutional demand is fomenting Bitcoin’s rise
In December 2017, data suggested that Bitcoin’s rally was fueled by retail and mainstream investors. At that time, CME BTC futures had just launched and the sector was devoid of institutional investment vehicles.
The bull run was predominantly supported by retail investors: it therefore came to an abrupt halt after a sharp sell-off caused by whales.
This time around, platforms focused on institutional investors are seeing explosive growth in trading activity. For example, recently the CME’s BTC futures market recorded an open interest of $1.27 billion, just behind OKEx and the second largest in the global Bitcoin Lifestyle market.
Institutional investors are unlikely to invest in Bitcoin with a short-term strategy. Many increasingly see it as a digital store of value and an alternative to gold.
As Cointelegraph previously reported, the increase in premium relative to Grayscale’s Bitcoin Trust suggests that institutions are increasingly seeking exposure to BTC and are willing to pay a higher price than the spot market for this privilege.
BTC is increasingly viewed as a store of value
Both institutions and high net worth investors are beginning to recognize Bitcoin as a store of value and a treasury asset. MicroStrategy, the U.S. company that purchased $450 million in BTC this year, started a trend that has led other institutions to allocate their capital to Bitcoin.
The perception of BTC as a hedge against inflation and a stable store of value could make BTC attractive to the broader financial sector in the medium to long term. Michael Saylor, MicroStrategy’s CEO, explained:
„Bitcoin is the best reserve asset and the emerging dominant currency network. It is the solution to the value reserve problem faced by every individual, business and government in the world. As this perception spreads, the world will change for the better.“
At the same time, Bitcoin’s performance has once again outperformed gold and the S&P 500 this year, despite both breaking their respective all-time highs.
So, it’s no surprise that Wall Street is now taking Bitcoin more seriously than it did in 2017. This shift was further demonstrated on December 3, when the S&P 500 announced its plans to launch cryptocurrency indexes next year.
Bitcoin’s fundamentals are stronger than ever before
As reported by Cointelegraph, Bitcoin’s fundamentals have never been stronger, considering that the network currently moves $500,000 per second around the world. In other words, every day Bitcoin transfers a value equivalent to $4.627 billion.
Furthermore, the network is ten times more secure than it was in the last months of 2017, as both hash rate and mining difficulty continue to reach new records this year. The hash rate indicates how much computing power is dedicated to validating Bitcoin transactions and protecting the network.