By Anna J. Park
Will 2020 end as another historic year for bitcoin? Many investors and market watchers are asking this question, looking at the cryptocurrency's remarkable upward move that's been continuing for the past three months.
The current bullish trend reminds market watchers of 2017, when the virtual coin's price started from about $900 in January to rise to its all-time high record of $19,783.06 in December.
This year alone, bitcoin rose by nearly 150 percent since the start of this year, when it was traded at $7179.96. As of around 2 p.m. local time Wednesday, the cryptocurrency's price hit as high as $18,417.70, getting closer to the record set in the winter of 2017. But the price fell back again to about $17,630.30 an hour later.
As the prices are volatile ― shown by Wednesday afternoon's sudden drop ― it's still too early to tell whether bitcoin will be able to break its previous record high and continue its rally later this year. While some pundits say the cryptocurrency will become worth around $1 million in the next decade, no one can be sure of the future of the cyber currency.
Bitcoin embraced by mainstream financial institutions and authorities
Yet, what is obvious is that the cryptocurrency has become more and more recognized in the financial industry over the past few years ― one reason market insiders say the current rally is fundamentally different from that of 2017, when the coin's price plunged after it hit close to $20,000.
The major difference this year from three years ago is that bitcoin is more often being considered a traditional asset just like the dollar or gold in its function by institutional investors as well as authoritative financial pundits. For instance, professor Nouriel Roubini of New York University ― one of the most famous critics of bitcoin who once referred to cryptocurrencies as "scams and bubbles" ― finally admitted earlier this month the function of bitcoin to store value.
Global financial firms like JP Morgan and Fidelity launched digital asset services, while Citi and Goldman Sachs published analysis reports, saying the cryptocurrency is millennial investors' gold.
This year alone, bitcoin has ranked as the No.1 asset that has seen the largest increase in value. The cryptocurrency has also proven itself to hold value amid uncertainties created by the pandemic and excessive liquidity, while the dollar and gold ― typical safe assets ― are losing value.
"As we remember bitcoin's crazy bull run in 2017 and the coin price's nosedive in the following year, some expected that the current upward trend might end soon. But the economic situation is very different from that year," Han Dae-hoon, an analyst from SK Securities, pointed out.
In his latest analysis report published on Wednesday, the analyst explained the current bullish run with three reasons.
First, devaluation of currency stemming from global liquidity supplies and a weakening dollar strengthened bitcoin's value. Secondly, a wider acceptance of decentralized finance (DeFi) encouraged investors to aggressively opt for digital assets with more confidence. Lastly, the cryptocurrency is now treated as a main asset by institutional investors. Introduction of digital coin payment services by major global payment firms like PayPal and Square also facilitated the current upward move.
"JP Morgan has started to provide banking services to global coin exchanges, and Fidelity is currently offering a custody service with authorization from the New York Department of Financial Services. Singapore's DBS Bank announced its plan to open DBS digital exchanges," the analyst's report stated. "Their shared stance is that swift move to embrace the cryptocurrency is a must, considering increasing demands for the currencies by VIP customers and millennial investors, as well as the rosy outlook of digital-based finance development in the future."