Bitcoin Rally Here to Stay – Or Fleeting?  

Amid the rallies that have marked all manner of asset classes in 2020 – where things hummed along to start the year, turned sour in the spring and then rebounded (nay, roared) into the waning months, bitcoin stands out.

As of this writing, and as noted by CNBC, the marquee name of cryptocurrency stands out as it touches fresh new highs of about $23,000, eclipsing the highs seen as far back as three years ago, when bitcoin approached $20,000.

The digital currency is up more than 200 percent year to date, and while speculation runs rampant about how high the price can go, as MarketWatch reports, some observers of Wall Street see bitcoin trading as high as $250,000 or more.

The key question remains, though: What’s different this time, if anything?

For one thing, institutional investors are increasingly getting into the game.

CNBC quoted Eric Demuth, CEO of cryptocurrency trading app Bitpanda, as saying that “this run is completely different from the one in 2017.” He said that “back then, the price was driven by mainly retail investors.”

But now, at least some asset managers have been embracing bitcoin as a hedge against currencies and gold. Investing titans such as Paul Tudor Jones have bought into bitcoin, holding a portion of assets under management with the crypto as a hedge against inflation, as reported by Bloomberg earlier this year.

We’ve perhaps been moving beyond the speculation that marked the “Wild West” atmosphere of crypto trading just a few years ago, headed toward the use of bitcoin as a tool for investment returns. But then the question becomes whether bitcoin can cross the Rubicon to full-fledged currency.

And therein lies the rub, to grab a line from the Bard. Investors watch other investors. They especially watch what the “smart” money – the big names – may be doing, and so they buy what the stars buy.

Thus, price gains become a bit of a self-fulfilling prophecy. Keeping bitcoin on the books to improve the worth of the “asset” side of the balance sheet (in this case, a portfolio) can be a sound strategy.

Elsewhere, staking a claim on bitcoin trading can pay off, too. Square, for example, said in its latest earnings report that revenue from bitcoin trading came to $1.6 billion, tied to activity facilitated through a trading feature in its Cash App. The company also bought $50 million of bitcoin to hold on its balance sheet.

But it may be the emerging-use cases through companies like PayPal that determine whether bitcoin’s surge will be long-lasting or ephemeral. As reported in this space, PayPal said that its 350 million users will soon be able to deposit bitcoin and other cryptocurrencies in their accounts and spend it at 26 million merchants.

In an interview with Karen Webster, Daniel Gouldman, CEO of crypto-banking platform operator Ternio, said PayPal’s endorsement may help crypto go mainstream.

“PayPal has basically just said, ‘hey, we’re going to open this up to everybody,’” Gouldman said. “Bitcoin is like a [crypto] 101 version. It’s made for Grandma, so no one — my kid, Grandma — can mess it up with PayPal.”

Ternio, of course, has linked with Visa as a cryptocurrency-focused enablement partner. PYMNTS reported in October that the partnership means Ternio will help crypto companies and FinTechs come to market with crypto payments that will travel the Visa rails – and are therefore accepted by any business or merchant that accepts Visa.

Visa’s own crypto efforts branch out beyond just bitcoin, as an announcement came in October of Coinbase opening up a waitlist for U.S. consumers interested in applying for its new Coinbase Card. The Coinbase Card is a Visa debit card that enables users to use their bitcoin or other crypto holdings to shop online and in stores. Crypto can also be converted to cash at the ATM.

These are still the early days, but reports that a bit more than an estimated 18,600 merchants globally accept bitcoin as of this month. That anticipation is what’s driving up the price.

And, of course, we’ll also eventually see digital dollars and other electronic versions of fiat crowd into the space. So for now, it’s too soon to tell whether 2020 is the year bitcoin got its tailwind … or peaked.

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The November 2020 study How Location Data Can Help Banks Prevent Online Fraud, PYMNTS surveyed a balanced panel of 2,141 U.S. consumers who own mobile devices and use credit or debit cards at least monthly. The study examined their willingness to share mobile location data with FIs to keep their accounts safe as well as their interest in switching to banks that leverage geolocation tools to prevent fraud.