The BTC price was $20,000 in December of 2017. Since then, it’s been bouncing around between $3000 and $13,000, and many have predicted that 2020 could be the year where it reached a new record. But now, given the global economy has come to a screeching halt due to the COVID-19 pandemic, it seems that’s likely off the card now.
It seems that Bitcoin just can’t catch a break since 2017. Will it ever reach a new record?
Many new technologies go through a pattern of discovery, over-excitement, despair, and, finally, acceptance. This effect has been studied by Gartner and once you understand it, it’s easy to see the human psychology behind it. This process has been seen with new technologies from ranging the internet to pharmaceutical drugs. The pattern goes something like this:
New technology is invented (the innovation trigger),
People get way over-excited about its possibilities (the peak of inflated expectations)
They quickly get bored when things don’t happen quickly enough (the trough of disillusionment),
Interest gradually returns as the technology reaches its potential (the slope of enlightenment)
The technology hits mainstream adoption (the plateau of productivity)
With Bitcoin, it’s pretty safe to say that the price record of 2017/18 was the peak of inflated expectations. Everyone expected Bitcoin to become the new digital form of gold and hit moon prices. But, the hype was far beyond the current level of technology’s development. Quickly, people realized this, and it came crashing down to earth again. Now, we’ve been stuck in the trough of disillusionment for some time. From a mainstream and investor perspective at very least.
The hype of the last Bitcoin bubble set huge price records that have proven to be extremely difficult to beat. It looks like Bitcoin won’t be getting another hype-drive bubble like the list one. So, the question of Bitcoin’s price record changes. We should ask, “Will Bitcoin sustain a large slope of enlightenment in the future?”.
The slope of enlightenment
The good news is that it looks like Bitcoin might already be on its slope of enlightenment. This kind of growth is very different from hype-driven growth. It’s based on real-world usability and realization of potential.
The key thing holding back Bitcoin and its underlying technology, blockchain, is scalability. Blockchain networks like Bitcoin and Ethereum simply haven’t proven they can handle the strain of global usage. During the peak hype period in 2017, transaction fees on the Bitcoin network reached over $50 per transaction. That’s a crazy number given that Bitcoin was designed as a cheap and reliable way of transferring money anywhere in the world. This effect of degrading performance as users join blockchain networks has been one of the core criticisms of many investors and financial firms.
Now, there are solutions to this blockchain scalability problem. One of the main candidates is second-layer solutions. These are clever methods of increasing the scalability of a blockchain network by taking transactions off of the main blockchain and processing them elsewhere. This takes the strain off of the core blockchain network being used. Many of these solutions are yet to prove themselves with mainstream adoption, but the ideas and the promise are there.
The next essential thing required for Bitcoin to grow to new highs in the long-term is real usability. It needs to become feasible to buy regular items with Bitcoin. Right now, that still isn’t the case.
Bitcoin in crisis
One of the biggest wildcards in recent history has been the global COVID-19 pandemic of 2020. Up until now, it was hoped that big-money investors would soon start pouring money into Bitcoin to jack up the price. Or, that bitcoin would be a safe haven currency in the case of another global financial crisis.
Judging by what’s happened with the Bitcoin price in 2020 so far, it seems like neither of those is very likely to happen any time soon. Investors have taken so much damage in the last few months that they are unlikely to want to expand their portfolio with risky assets like Bitcoin. It’s also obvious that Bitcoin isn’t the safe haven ‘digital gold’ that many people thought it was.
However, there is one interesting point to make. Bitcoin was created in the wake of the 2007/8 Global Financial Crisis. During that time, the failure of financial institutions and quantitative easing degraded the wealth of billions of people around the world. Bitcoin was created as a way for regular people to retain true control of their wealth. Now, to deal with the enormous economic hits that are coming along with the global health pandemic, many governments are printing insane sums of money, measured in the trillions of dollars. Amounts that are making the GFC look like a child’s play. This level of money printing is going to hurt the wealth of many people again just like in 2008. This time, Bitcoin is an established network and there could be an opportunity to gain some users.
Halving in May
Another big boost for the Bitcoin price could come from the Bitcoin halving in May. This event is where the reward for mining Bitcoins is halved, and subsequently, the supply of Bitcoin is also halved. It’s typically accompanied by a large long-term price rise for Bitcoin. This is to be expected as the supply of Bitcoin is reduced. It’s just another factor that’s making 2020 into a crazy year for Bitcoin.
Slowly but surely
Bitcoin still hasn’t shot up to record prices since 2017. The hype required for such a large price rise hasn’t come. The big-time investors still aren’t convinced, and even a global financial crisis hasn’t drawn millions to Bitcoin as a safe haven asset.
But, Bitcoin and its technology are consolidating in many ways. As governments around the world desperately throw money at another economic crisis, Bitcoin may have an opportunity to shine and hit new price records in the process.