Bitcoin is experiencing a bull run again. How is it different from 2017?

In November 2019, we predicted that the Bitcoin halving would take place in a few months.

At the beginning of Bitcoin's creation, it was determined that it was "created" to reward miners who maintain the blockchain and verify transactions. Over time, in anticipation of rising demand and value, the rewards will become smaller and smaller - approximately every four years, the number of newly issued Bitcoins allocated to miners will be reduced by half.

Judging from historical data, prices usually rise sharply a few months after the “halving”, and now we have come to such a moment again.

However, it seems that this time the situation may be different compared to the last time this happened in 2017. In December 2017, Bitcoin was hyped up. The price soared to nearly $20,000, but when panic set in, the market turned bearish, eventually triggering a crypto winter.

Now, six months after the latest halving, and despite the market crash in March and the ongoing uncertainty surrounding the pandemic, Bitcoin is back above $18,000 and is widely expected to set new highs.

What’s different about this surge?

One of the main drivers of Bitcoin's current surge is the participation of heavy institutional investors such as Paul Tudor Jones and Square, as well as the recent announcement of PayPal's support for Bitcoin. These moves have actually been brewing for quite some time, as more and more institutional-minded exchange operators, custody providers and other financial players have begun to enter the crypto space.

These moves are significant not only because they give Bitcoin more legitimacy as an asset, but also because it means we can expect more money to flow into the market, potentially driving prices higher and bringing greater stability.

However, as we saw with the black swan event in March, institutional investors are just as prone to selling Bitcoin in extreme market conditions as retail investors, so this may not be a strong enough reason to say that this surge is different from the past, or that this is not just another short-lived hype.

According to Chainalysis, there are more factors at play. Among them is the notion that Bitcoin is indeed becoming increasingly scarce — at least, as a tradable asset.

While the amount of liquid Bitcoin is the same as during the 2017 bull run, the amount held in illiquid wallets (HODLers) is much higher – accounting for nearly 77% of the 14.8 million Bitcoins that have been mined (not classified as lost). This leaves only 3.4 million Bitcoins available to buyers, while demand is increasing.

It looks like Bitcoin is performing as expected. As the world suffers an economic blow during a global pandemic, geopolitical tensions rise, fears of inflation and distrust of public institutions increase, Bitcoin seems to be becoming a "people's" currency that can be freely traded without the need for banks, governments or middlemen.

Of course, when we look at the actual industry infrastructure that has emerged since Bitcoin’s creation, we see a lot of consolidation around regulation and fiat on- and off-ramps, but essentially, Bitcoin’s reputation as a safe haven asset seems to be continually solidifying.