The investment of a decade: Bitcoin, of course

31.12.2019 15:02|Bartosz Grejner

“If someone has invested in cryptocurrencies 10 years ago, they probably have a fortune now. Nine million - this kind of percentage increase was recorded by Bitcoin over the last decade (since July 2010), according to Bloomberg. At the same time, the main US market indexes grew by 300%, gold by 25%, and WIG20, the index of the largest Polish companies, fell by about 8%,” writes Bartosz Grejner, Conotoxia Analyst.

Up until the end of 2019, Bitcoin has shown robust growth, even though its price of around 7.2 thousand USD at the end of 2019 represents just above a third of the high recorded in December 2017.

That won't happen again?

These substantial increases can, however, be extremely hard-to-repeat, if even possible. It is already known that many of the hopes fuelling this 9-million profit will not come true. There is no rapid widespread adoption of Bitcoin, and at the same time, cryptocurrencies alternatives are multiplying. There are currently nearly 5.000 of them - according to CoinMarketCap.

Bitcoin supporters can seek hope in 2020 in the halving phenomenon, i.e. reduction of a reward for adding a new block. This will happen in May, and the reward will fall from 12.5 to 6.25 Bitcoins. The two previous halvings reinforce hope. According to Bloomberg's data, after the first one in 2012, the cryptocurrency price increased by nearly 8.2 thousand in a year, and after the second one in 2016 by about 2.2 thousand in a year and a half.

The data sample is obviously pretty small, and there is no guarantee that the same story will be repeated for the third time. The market situation is also rather different than in previous years. Bitcoin, as well as probably all the cryptocurrencies in general, do not have as much media exposure as they had two years ago. Their limited scale of use in everyday transactions has discouraged many financial institutions from increasing interest in Bitcoin or other altcoins.

A competition that is hard to beat

A couple of years ago, there was not as broad a discussion as today about the so-called stablecoins, i.e. cryptocurrencies linked to traditional assets, such as dollars. This is the basis of, among other things, the Libra created by Facebook, which, however, still encounters major problems in the USA and the EU, and the largest partners have already withdrawn from the project.

There are emerging ideas of creating one' own cryptocurrencies by the biggest central banks in the world. If the CBDC (central bank digital currency) were introduced in various countries or groups of countries, they could be a huge blow to Bitcoin. These projects are contrary to the idea behind the 9 million percent appreciation of Bitcoin in the last decade. After all, the most popular cryptocurrency remains outside the financial system and does not depend on any central bank or government.

Stabilization? It won't be easy even to achieve that…

Perhaps the best thing to wish Bitcoin in 2020 is stability. Though, it won't even be easy to get it. It may turn out that the aforementioned Bitcoin halving, planned for May, has already been fully included in its valuation. If this is the case, then the current level may be a little too optimistic. The exchange rate around 7,220 USD on the last day of 2019 has been below three significant levels of long-term moving average prices - 50-day, 100-day and 200-day. Without a positive stimulus for the market, the current downward trend may bring the Bitcoin price back to 3-4 thousand USD, around the levels seen in Q1 2019. Hopes of wider adaptation, rebound and return of growth may support demand and consequently the Bitcoin value at a relatively high level and continue to cause strong fluctuations in value. However, the dream of a seven-digit increase is unlikely to happen again, especially in the case of Bitcoin.


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