The cryptocurrency star made a strong comeback in 2020. In one year, the value of bitcoin has quadrupled. The threshold of 30,000 dollars was even exceeded in early January. An absolute record.

Crystal ball More seasoned investors Digital gold Paypal's announcement An asset like any other?

Bitcoin has just had a crazy year. In mid-December, the cryptocurrency star exceeded the 20,000 dollar mark per unit, before soaring towards 30,000 dollars! This is an absolute record for bitcoin, which had approached this symbolic value at the end of 2017 without ever crossing it.

Since this “resistance” threshold, as crypto analysts call it, was crossed, no one knows how far this extremely volatile virtual asset can go. Some are talking about hitherto unimaginable peaks: “Bitcoin could exceed $100,000, estimates Mathieu Jamar, cryptocurrency expert and founder of the specialized fund DCY.io. It's an intuition I've had for a few years and which is shared by many analysts: we are moving ineluctably towards a six-figure value. “With an asset as speculative as bitcoin, that's a possibility. During the last cryptocurrency booms, in 2013 and 2017, its value had increased tenfold in the space of a few months. But the market is also not immune to a serious correction…

Difficult to predict the future. On the other hand, we can look back on a colorful year 2020, during which the value of bitcoin was multiplied by three! How to explain this resurgence after 2018 and 2019, a period that some call the crypto-winter, the winter of cryptocurrencies, characterized by sluggish, even freezing, activity on the market? “In 2020, bitcoin has only gained adoption, both from the side of institutional investors and individuals”, observes Mathieu Jamar. According to a survey conducted by the specialized fund Fidelity among 800 American and European investment funds, the latter “are more and more numerous to hold crypto-assets in their portfolio”. A third of respondents claim to hold cryptocurrencies and 60% of them believe that these assets have their place in an investment strategy. According to the specialized site Coinmarketcap, the total capitalization of the cryptocurrency market exceeds 870 billion dollars worldwide (figures as of January 4, 2021). Two-thirds of these amounts are invested in bitcoin, the number one cryptocurrency. The approximately 8,000 cryptocurrencies that complete the market share the rest.

Given the amounts involved, it is clear that retail investors, new or experienced, are not the only ones holding bitcoin and speculating on its value. The American investment structure Guggenheim Partners has just announced its intention to devote 10% of its Macro Opportunities fund, which weighs more than 5 billion dollars, to bitcoin. The publicly traded, crypto-enthusiastic-run IT firm MicroStrategy has just said it plans to put $250 million into bitcoin.

Individual investors are there too. But their profile has changed somewhat in recent years. At the end of 2017, during the last bull run (soaring price) which saw bitcoin peak just below 20,000 dollars, many novice investors became interested in this very attractive and very risky new asset. Since then, the latter would have calmed down. “Customers are very different today, explains Marc Toledo, co-founder and CFO of Bit4You, the first Belgian cryptocurrency exchange platform. They had time to learn. They are more sophisticated investors.”

“In 2017, many analysts attributed the bullish trend to intense retail activity. This had been presented as a translation of Google Trends (Internet research, Editor's note) in investment behavior,” adds Mathieu Jamar. At the time, a wave of newbie investors were feverishly discovering the deregulated cryptocurrency market. Search trends for keywords like “bitcoin” or “cryptos” on the Google search engine were directly correlated with the rise in price. Today, when bitcoin reaches the same values as in 2017, these Google Trends are no longer significant. “It invalidates the theory that retail investors make the market. Google Trends are not the cause but the consequence of an increase in the value of bitcoin”, analyzes the founder of DCY.io. According to this specialist, despite the crossing of the record bar of 20,000 dollars, the upward movement has in fact not even begun. We would only be at the beginning of a new outbreak, a new bull run.

Another factor explaining the rise in the price of bitcoin in 2020: the increase in its use cases. Bitcoin would increasingly show its ability to be used, on the one hand, as a “safe haven” value and, on the other hand, as an exchange currency. One of the most common qualifications on the part of bitcoin enthusiasts is to compare the cryptocurrency star to a commodity, a kind of digital gold. The quantity of bitcoin created in the long term being strictly defined by its computer code at 21 million units very exactly (we are talking about the year 2140 for the creation of the last bitcoin), bitcoin addicts believe that its value can only increase , due to its rarity. “Bitcoin is a safe heaven, an investment that helps protect against inflation and against the devaluation of traditional currencies,” says Marc Toledo (Bit4You). Remember, however, that the high volatility of this digital asset places it in the category of high-risk investments.

Second use case: bitcoin would gradually become a real currency. This is one of the basic ambitions of this alternative currency, which appeared in 2009, in the aftermath of the financial crisis. The promise of bitcoin is to create a new global monetary order that would operate on the fringes of the traditional financial system. A sort of monetary utopia, bitcoin should allow its users to make purchases without going through traditional intermediaries in the sector, namely banks.

Eleven years later, we are not there yet. Some merchants or websites accept payments in cryptocurrency. But it cannot be said that this usage has become common; it remains reserved for a community of knowledgeable people.

An event that occurred in October 2020, however, gives bitcoin promoters hope. The very popular online payment system PayPal has indeed announced that it will soon be possible to pay in crypto-currencies with 26 million merchants worldwide. This announcement is one of the most important in recent years for the crypto sector. Given PayPal's global footprint, this new feature could advance the use of these particular digital assets.

Another project set to shake up the world of payment: Libra. Facebook's cryptocurrency changed its name in 2020 and is now called diem. The project is less ambitious than initially, but it could materialize in early 2021. It would be the first consumer cryptocurrency, with incomparable adoption potential: the applications of the Facebook galaxy (Instagram, Messenger, WhatsApp, etc.) are indeed integrated into the smartphones of more than… two billion human beings!

The year 2020 was also an opportunity to see that bitcoin is ultimately not an asset totally uncorrelated from the global economy and its upheavals. On March 12, 2020, the Covid-19 pandemic caused its first major pullback in the financial markets. All the world stock exchanges, worried about the progression of the virus, closed in the red. This mega-crash did not spare bitcoin, which plunged 40% in one day!

Mathieu Jamar sees this as an ambivalent signal: “On the one hand, this shows that bitcoin is not really a safe haven. On the other hand, this gives it its letters of nobility: bitcoin is an asset like any other”. With a very marked particularity: a very high volatility. A few weeks after this crash, bitcoin was again prancing towards the heights. Until you reach them, and even exceed them.