Bitcoin breaks $40,000 as 2020 price surge continues in new year

Thu, January 7, 2021, 11:55 PM GMT+5:30·8 min read

Bitcoin (BTC) started 2020 at $7,200. It ended the year at nearly $30,000, up 296%. (For comparison, the Nasdaq rose 43% in 2020, the S&P 500 rose 16%, the Dow rose 7%.)

The surge continued full-steam into 2021. It took bitcoin 10 years in existence to reach $20,000 on most exchanges, on Dec. 15. Then it took just 17 days to reach $30,000. (It took the Dow Jones almost three years to make the same move.) Bitcoin broke through $30,000 for the first time on Jan. 2, then climbed to $32,000 just hours later. On Jan. 5, it broke $35,000, and on Jan. 7, it hit $40,000.

The 2020 bitcoin bonanza can be chalked up to a convergence of many positive factors, as well as a convergence of narratives.

In the past, a common criticism of bitcoin from skeptics was that it isn’t useful as a real currency—you can’t spend it in most places. In 2020, investors decided they don’t care about that, and don’t want to spend their bitcoin anyway. Institutional firms flooded in, viewing cryptocurrencies as a legitimate asset to hold in their portfolio.

At the very least, the consensus now appears to be: Bitcoin isn’t going away. It has existed for 10 years and will continue to exist.

The same cannot be said with absolute certainty about any of the other multitude of cryptocurrencies (“altcoins”), except perhaps ether (ETH), the token of the Ethereum network. (XRP, the token developed by Ripple Labs, has been in the top four cryptocurrencies by market cap for years, but is now under fire after the SEC sued Ripple Labs, alleging it conducted a $1.3 billion unregistered securities offering.)

If the late 2017 bitcoin price surge was driven by crypto newbies buying in without doing their homework, the 2020 ride has been driven by institutional buying. While newcomer retail investors are again buying bitcoin, many individual Wall Street names and consumer-facing payments companies have also warmed to crypto. This has all happened against the backdrop of the COVID-19 pandemic, with central banks pumping out stimulus money—a scenario that has served as a reminder of bitcoin’s scarcity and its appeal as “digital gold,” a hedge against inflation.


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