Opinion: Bitcoin will remain the best performing asset class in 2020

Bitcoin burst onto the global scene in 2017, with a collective market surge that made many early adopters millionaires (or billionaires) overnight.

In 2020, when the coronavirus is raging, the price of Bitcoin is still up about 5% this year, but after experiencing huge fluctuations in the past year, Bitcoin is still down about 50% from its 2019 high.

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Now, as traders focus on the largest quantitative easing program in history and investors scramble to keep up with the fast-moving and uncertain situation, Bitcoin could outperform the broader market in 2020.

“Economists are dealing with three levels of uncertainty,” Paul Donovan, chief economist at UBS, wrote in his daily update.

"Uncertainty about the coronavirus. Uncertainty about the policy response. Uncertainty about the economy, about the virus and about the policies. Changes in any of those will change economic outcomes."

Donovan added that the latest consumer confidence survey could be "thrown away without reading".

Amid all this uncertainty, Bitcoin’s roadmap remains unchanged as the highly anticipated Bitcoin halving event approaches.

Next month, the number of bitcoins the network rewards miners for maintaining the network will be halved for the third time, from 12.5 bitcoins per block to 6.25.

By protocol design, Bitcoin is halved approximately every four years until the network has produced a maximum supply of 21 million bitcoins — which is not expected to happen until roughly the next century.

“Bitcoin has been the best performing asset over the last year and even over the last decade. With so much money being pumped into the system right now and the halving coming up, I don’t see any reason why Bitcoin won’t continue to outperform the market,” said Mati Greenspan, founder of financial advisory firm Quantum Economics.

A survey of major Bitcoin investors showed that most were optimistic at the beginning of the year, expecting the Bitcoin price to soar to over $20,000 per Bitcoin in 2020.

“The current unexpected global crisis and a series of major events in Bitcoin over the next nine months are causing speculation across the industry that another bull run is imminent, and I believe we can only expect the price of Bitcoin to continue to rise in the future. “Everything is currently pointing towards $20,000 or even higher,” said Danny Scott, CEO of CoinCorner, a Bitcoin and cryptocurrency exchange based in the Isle of Man.

As the Bitcoin industry prepares for a supply shock, central banks and governments are speeding up the printing presses.

U.S. President Donald Trump has signed a fourth coronavirus relief package that will provide a total of $484 billion in aid to small businesses and the healthcare system.

Stocks on Wall Street climbed, recouping a week of losses, after Trump signed the latest economic stimulus package.

“With the stock market having ended a decade-long bull run, fixed income under pressure, and we’ve seen prices of many major commodities tumble, we expect to see steady growth in the price of Bitcoin by the end of the year as quantitative easing hits the market,” said Marcus Swanepoel, CEO of London-based bitcoin and cryptocurrency exchange Luno.

“Bitcoin has outperformed most other major asset classes over the past five years, so there is a good chance that this trend will continue, especially with the increased fragility of the existing financial system that we have seen over the past few months.”

Meanwhile, lawmakers are expected to take bigger steps this month to comply with the CARES Act, under which tens of millions of Americans received checks for about $1,200, some of which have gone into bitcoin, according to Brian Armstrong, CEO of Coinbase, one of the largest bitcoin exchanges in the United States.

Binance US, the American arm of Binance, the world’s largest bitcoin and cryptocurrency exchange, has reported an 82% increase in daily users over the past month.

“The influx of new users could mean that [Americans] are looking for more cost-effective ways to get into bitcoin or get out of cryptocurrencies,” said Catherine Coley, CEO of Binance US, adding that demand for bitcoin could outstrip supply.

Over the past 12 months, the price of bitcoin has risen nearly 40% from $5,500 to $8,500 as plans by tech companies for crypto and digital financial services have pushed central banks toward digital currencies.

Some believe that due to the coronavirus pandemic, Bitcoin could solidify its status as a so-called safe-haven asset, with investors buying both gold and Bitcoin during times of uncertainty.

Gavin Smith, CEO of Panxora Group, a coalition of cryptocurrency companies, said:

“If quantitative easing leads to higher inflation, we may see Bitcoin increasingly used as a hedge against global instability, which would have a significant positive impact on its performance.”

“However, Bitcoin is far from a magical cash cow – there will certainly be volatility, so while prices may be trending upwards, investors should proceed with caution.”

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