This is how institutional investors sparked the Bitcoin rally to $ 40,000


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From the COVID-19 pandemic to mass money pressures to social unrest, 2020 has been a wild year. Along with a spate of major events, Bitcoin (BTC) also had a stellar year in the price category, eventually climbing from $ 3,600 to over $ 41,950, beating the 2017 all-time high of $ 19,892.

A number of events, both crypto-specific and mainstream, appeared as catalysts for Bitcoin’s price action. Several players in the crypto industry have rated the events that they believe will have most impacted BTC price developments in 2020.

Anthony Pompliano, co-founder of Morgan Creek Digital, described the halving of Bitcoin as the event with the greatest impact on the price of the asset, according to his comments to Cointelegraph. “Incoming daily supply has decreased and demand has increased significantly, causing the USD price to rise,” said Pompliano.

Bitcoin’s halving occurred on May 11, 2020. The third such event since the asset was launched in 2009, BTC halving, resulted in miners receiving 6.25 BTC for block rewards instead of 12.5 BTC. Previous Bitcoin halves resulted in price declines followed by sideways price movements, although there were huge upswings after each halving.

The 2020 event was no exception as Bitcoin surged above record highs a few months after the May event. Analyst Plan B’s Bitcoin stock-to-flow model serves as a popular forecasting tool in the crypto space. The model predicts rising future BTC prices based on halves that decrease the incoming supply of the asset.

BTC / USD 1 week chart. Source: TradingView

Pierce Crosby, general manager of the crypto asset charting platform TradingView, told Cointelegraph three developments that he believes will have the greatest impact on the value of Bitcoin in 2020. The first aspect he noticed:

US-based major crypto exchange Coinbase recently filed for approval with the Securities and Exchange Commission to conduct an initial public offering. The move would bring the company public and lead to tradable company shares in the mainstream US stock market. The news actually coincided with a modest downward movement in BTC prices on the day of development, though Crosby’s comment appears to indicate the IPO merely as a result of underlying and continuing demand.

The “institutional takeover resulting from the reallocation of treasury from MicroStrategy to Bitcoin” was another sweeping event for the price of BTC in 2020, according to Crosby. A number of large mainstream companies revealed large Bitcoin positions in 2020. It all started when billionaire Paul Hudor Jones announced his Bitcoin position in May 2020.

In the second half of the year, business intelligence company MicroStrategy raised hundreds of millions of dollars in Bitcoin. Other firms like Jack Dorseys Square and MassMutual have also posted BTC purchases as part of a big player buying trend.

Appreciation of the Bitcoin price as institutional investors. Source: TradingView

Crosby also said “DeFi’s boom and the corresponding leveraged products being built by this space” had an impact on the price of BTC in 2020. Over the past year, a variety of DeFi solutions have hit the crypto industry, giving attendees new ways to capitalize on their capital.

Decentralized funding, which at times resembled the 2017 ICO bubble, moved significantly in 2020. Associated assets saw dramatic price volatility, while seedy projects also emerged during the boom. In line with the hype, Bitcoin saw an upward trend towards record levels after recovering from its COVID-19-related price drop in March.

Speaking of the pandemic, Cheds, a crypto trader and analyst on Twitter, said COVID-19 had significantly driven the price of Bitcoin over the past year.

Cheds said:

“COVID had by far the largest impact on the BTC # Bitcoin price in US dollars in 2020, temporarily falling from 8,000 to around 3,000.”

Bitcoin price on Black Thursday. Source: TradingView

In March 2020, mainstream markets and crypto assets fell sharply in price amid rapidly growing concerns and prevention measures against COVID-19. However, Bitcoin rebounded faster than traditional financial assets. “Undoubtedly, this has sped up the process of finding the bottom, and we’ve since hit all-time highs again, aided by news of institutional investment,” Cheds said of the pandemic.

“Events like MicroStrategy’s public purchases and the addition of $ BTC to the PayPal arsenal added a lack of legitimacy veneer and paved the way for even more of these types of investments in 2021,” added Cheds. PayPal already presented the expansion of its platform to include several crypto assets in October.

The 2021 rally is based on fundamentals, not FOMO

When asked which events had the least impact on the price of Bitcoin, Pompliano said with a smile, “Most people’s opinion on Twitter”. Meanwhile, Crosby hinted at Bitcoin’s detachment from the political arena. “The policy has very little impact this year, which is very different from previous years,” he said. “We expect the government’s impact with Bitcoin to become more visible in 2021.”

At the end of the year, the US government proposed a decision to monitor self-managed crypto asset wallets, for which the short comment period recently ended. The SEC also filed a motion against Ripple and its XRP asset in late December. Both events could signal the beginning of increased government involvement.

Pompliano has often referred to Bitcoin as an uncorrelated asset when it comes to other financial instruments. An October 2020 report by Fidelity confirms such a view and concludes that Bitcoin has virtually no correlation with price movements in other markets.

Throughout 2020, the world gave Bitcoin price plenty of headlines to respond to. Some news events appeared to be effective and others not, although it might be impossible to definitively prove a direct correlation.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Every investment and trading step is associated with risks. You should do your own research when making a decision.