Bitcoin breaks all-time high of $20,000, how is it different from the 2017 bull run?

Bitcoin (BTC) price surged to all-time highs yesterday, quickly surpassing $20,000, showing bullish momentum for the top cryptocurrency.

While it’s easy to draw parallels between this year’s bull run and the speculative frenzy that fueled 2017’s rally, the fundamentals supporting Bitcoin are far stronger today than they were just a few years ago.

Bitcoin is an inflation hedge

While there are many indicators that could explain Bitcoin's surge this year, it's important to start at the top. Unlike 2017, investors are hoarding Bitcoin for a clear purpose today. The digital currency is driving wider mainstream adoption as an effective hedge against inflation, especially among savvy investors who understand monetary policy.

Since its inception, Bitcoin has been a superior store of value than any other asset. The deflationary halving event in May 2020 highlighted Bitcoin’s scarcity, attracting more investors than ever before.

As cryptocurrency analytics firm Chainalysis reported last month:

“First-time Bitcoin buyers, as well as buyers looking to sell fiat currencies and buy Bitcoin as a hedge against worrisome macroeconomic trends, are currently the main source of demand.”

Institutional needs

2020 could go down as the year major institutions reform Bitcoin, perhaps permanently. While Bitcoin’s surge in 2017 was driven primarily by retail speculation, the 2020 bull run appears to be led by cool, smart, savvy investors.

For months, Cointelegraph has been reporting on the gradual acceptance of Bitcoin by institutional investors. Paul Tudor Jones, Stanley Druckenmiller, Grayscale, PayPal, Square, MassMutual, MicroStrategy, and Ruffer Investment Company are just a few of the investors and companies that have increased their holdings of Bitcoin.

Even Jim Cramer, a well-known television personality from CNBC’s “Mad Money,” bought into Bitcoin when the price recently dipped below $18,000.

These names were not present during the retail-driven frenzy of 2017, when FOMO (fear of missing out) was the main catalyst for Bitcoin’s brief surge to $20,000.

The rise of illiquid wallets

Another notable difference between the 2020 bull run and the 2017 bull run is the amount of Bitcoin held in so-called illiquid wallets.

According to Chainanalysis, illiquid wallets, also known as investor-held Bitcoin, have sent less than 25% of their total Bitcoin holdings. Using this metric, Bitcoin in illiquid wallets currently accounts for more than three-quarters (77%) of the 14.8 million Bitcoins mined that have not been identified as lost. Chainanalysis said this amount "has not moved from its current address in five years or more."

The company explained:

“As demand increases, there are only 3.4 million bitcoins available to buyers at any one time.”

As the chart below shows, “investor bitcoin” has surged since the bitcoin price peaked in late 2017. In other words, investors are buying and holding bitcoin, rather than flipping it for a quick profit.

Significant differences between “trader bitcoin” and “investor bitcoin” wallets since 2017: Chainalysis

The number of active addresses has been growing steadily, with wallets holding at least 0.1 BTC

Unlike 2017, when bitcoin network activity peaked as the price of bitcoin rose, the number of unique active addresses has grown steadily over the past two years, according to data provider Glassnode.

Number of unique active Bitcoin addresses vs Bitcoin price: Glassnode

What’s more, there were approximately 19.6 million addresses sending or receiving Bitcoin in November, the third-highest monthly address total on record.

Glassnode data also shows that as of June this year, the number of investors holding at least 0.1 BTC hit a new record. As Cointelegraph reported, more than 2.75 million addresses have held more than 0.1 BTC since April 2019.

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