Bitcoin has had a brilliant 2020. Despite a crash of 25% in March when the COVID-19 crisis exploded across the globe, at the end of November the cryptocurrency hit an all-time high of US $19,850 and it may be that the $20,000 barrier will be shortly breached. The world’s no. 1 digital currency has more than doubled in value over the course of the year. It seems clear that the pandemic has led more and more people to take the plunge with Bitcoin. Here are three reasons why:
Bitcoin as a side hustle (or new career)
Official figures suggest that around three quarters of a million UK jobs have been lost as a result of the Covid-19 crisis so far, and while this is a frighteningly large number in itself, it is dwarfed by the number of employees being placed on furlough under the Government’s wage subsidy in March. At its height, nearly 9 million employees – a quarter of the UK’s workforce – were furloughed, and it is thought that currently in the region of around 4 million are still on the scheme. Unemployment and forced inactivity has led to a surge of people investing in Bitcoin (and other digital currencies) to either plug the gap in their reduced furlough wage or to try a new career as a trader. There are also millions of office workers still working remotely who have been able to make significant cash and time savings from not commuting into work. With nights out and the like rare due to social restrictions, many people have more disposable income and are looking for opportunities to invest – Bitcoin has no doubt been a beneficiary.
Bitcoin as a safe haven
Despite the virus making the news towards the end of 2019, when COVID-19 finally bit in March governments worldwide seemed taken by surprise and quickly moved to undertake massive stimulus programmes and major quantitative easing actions. This has led to global inflation of the money supply and this has only been beneficial to the value of Bitcoin, as it underlines its scarcity. When the Bitcoin era came to life in 2008, it was promised that no more than 21 million coins would ever be created, and this limited supply gives the cryptocurrency a similarity to gold, as the value for it is determined purely by what people are willing to pay. Investors are increasingly seeing Bitcoin as a store of value. The social and political effects of the crisis have also created a lot of turmoil in the stock and foreign currency markets, and investors are increasingly looking for alternative (and safer) places to put their money. While Bitcoin still has a reputation for volatility, many experts say it still seems more stable than the stock market at this moment in time. The global and decentralised nature of Bitcoin also mean as an asset it is not tied to the performance or problems of any specific country, which makes it highly attractive right now. Investors are certainly seeing Bitcoin as a store of value these days!
Media Coverage
When Bitcoin last boomed in 2017 it was a major news story, and not only in the financial press as you’d expect, but it also broke through to mainstream news media. Everywhere you went people were talking about it. Even if they had no previous interest in investing, people all over the world were trying to understand Bitcoin and wondering how the hell you actually bought it! Millions of first time investors started to buy up Bitcoin and other cryptocurrencies in exchanges, but there was a plethora of deep criticism from many economic experts and the news began to turn sour, with the currency taking a major tumble in early 2018. Many people lost their shirts unfortunately, and the performance didn’t improve quickly, and when legendary investor Warren Buffett famously described Bitcoin as “rat poison squared” in May 2018 it hardly helped improve investor confidence. However, the 2020 surge has reached the same heights, and yet almost no-one is talking about it. The media noise this year has been dominated daily by COVID-19 news and developments, and even Donald Trump losing the Presidential Election only served to knock COVID off the front page for a few days. The far lower media volume around Bitcoin has meant far less negative news and comment and this again has encouraged investors to buy in.
