Everyone’s Talking About Bitcoin AGAIN — What’s Different This Time?

Cody Garrison | 11/30/2020

As the COVID-19 pandemic ushered in a profound period of abrupt change across the globe, Bitcoin was far from immune. Companies large and small were forced to pivot to remote work, forcing society to adapt and innovate 3–5 years ahead in just 3–5 months. Classes, birthdays, graduations and parts of daily life transferred into digital mediums — as COVD-19 re-engineered our minds to adapt to digitization. It’s logical for a modern and globalized monetary system to do the same.

As we wrap up the rollercoaster that was this year, we take a closer look at Bitcoin, the first, largest and most popular of the 2000+ cryptocurrencies in existence today. Mirroring the aggressive price surge we saw at the end of 2017, we again find Bitcoin smashing through to new all-time highs as the year comes to an end.

This recent surge begs the question — what’s different this time around?

To put it simply, Bitcoin is in the process of emerging from its ‘angsty teenage phase’ that it occupied for the last three years. Its actively rejected its past as a shadowy, underground currency used for illicit, often anonymous transitions, while just getting ready to embrace its future — a future of sweeping global regulation, institutional backing both on the building and investment side, and mainstream adoption across an array of industries and countries worldwide.

This transition; accompanied by the unplanned COVID-19 induced digitalization of society has triggered three distinct paradigm shifts in 2020 that will likely define the next decade for Bitcoin.

1. Inflation:

The Coronavirus pandemic changed everything. Just as this is obvious in our everyday lives, it is obvious to Bitcoin. As US officials scrambled to correct the plummeting economy in the wake of the virus induced shutdowns, radical (and potentially reckless) stimulus efforts were enacted by the Federal Reserve and Treasury Department. Near zero interest rates, coupled with rabid money printing, ultimately resulted in 35% of all US dollars in existence haver been printed in the last 10 months. (See Figure)

These efforts have led many to question the long-term ramifications that will come from these policies enacted in the chaos. The US Dollar is seen as the worlds reserve currency, the currency on which the global economy is ran. How will inflation not de-value the US dollar and create global instability when they are being created with such reckless abandon? Time will tell.

Figure 1. (Source: Federal Reserve Bank of St. Louis)

2. Wall Street (Finally) Wants In:

Sitting on the sidelines since its inception in 2009, Wall Street has always been apprehensive of Bitcoin. Whether it be the stomach-churning volatility, the anonymity of its original creator(s), or simply a lack of understanding to Bitcoin’s “place” in a rapidly evolving economy, there was never a shortage of excuses for large money managers ignoring the asset class.

Yet, as Bitcoin’s technology and the broader cryptocurrency ecosystem continued to mature following the epic price collapse in 2018, many across the industry have begun to realize Bitcoin’s staying power.

This shift in ideology, coupled with the COVID-induced inflationary backdrop; saw some of Wall Street’s biggest players including Fidelity to JP Morgan change their tune. Seemingly overnight, Bitcoin became seen as a perceived ‘digital-based safe haven’ from the US dollar’s potential inflation due to its fixed supply — only 21,000,000 Bitcoin can ever be minted. This Wall Street surge is evident according to a recent report from data firm Chainalysis where investors who bought at least 1,000 bitcoins — worth roughly $27 million at today’s price — and have had an account open for less than a year, have driven significant demand since September. It’s off to the races for Wall Street

3. Access:

Cryptocurrency has never been easier to buy, sell, trade or hold — for the general public and for Wall Street titans alike. Just a few years ago, the only viable routes to covert fiat currency into cryptocurrency was through unregulated foreign exchanges like Binance, Mt Gox, or through the physical in-person exchange of local currency for Bitcoin via Localbitcoins.com. Many steered clear of this immature and unregulated industry for good reason, noting instances such as the hack of Mt Gox, one of the first Bitcoin exchanges on the web, in their reasoning.

Since then, we’ve seen a plethora of more trusted, but still often confusing onramps to investment — be it through more established companies such as PayPal or Square’s Cash App, regulated US based exchanges (Coinbase, Gemini) or third-party trusts like Greyscale Bitcoin Trust.

Here’s the good news — it’s only going to get easier for the masses to access. As popular brokerage accounts such as Fidelity, Schwab, and Robinhood begin to offer Bitcoin products; and the SEC continues to discuss the rollout of a Bitcoin ETF, the Bitcoin movement is ramping up for another decade of hyper-growth.

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These three paradigm shifts have ultimately triggered a reckoning for Bitcoin that the industry has anxiously anticipated for 10 years. As these changes play out, this column will aim to educate readers on the emerging digital economy, clear up the misconceptions of blockchain and cryptocurrency, and provide a high-level consolidation of the most important headlines across the tech, markets, politics and adoption of cryptocurrency into our daily lives.

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The views above are opinions of the author and clearblock insights. They are not to be taken as investment advice.