2020 was unforgettable, especially for Bitcoin. To help memorialize this year for our readers, we asked our network of contributors to reflect on Bitcoin’s price action, technological development, community growth and more in 2020, and to reflect on what all of this might mean for 2021. These writers responded with a collection of thoughtful and thought-provoking articles. Click here to read all of the stories from our End Of Year 2020 Series.
It is likely that 2020 will be remembered by most as a year of hardship, lockdowns, masks and lonesome holidays.
While the world has been chaotically dealing with pandemics and politics throughout this year, Bitcoiners have been building. The last 12 months have been big for Bitcoin, the entire ecosystem and bitcoin mining in particular. Let’s take a look at a few aspects of how bitcoin has strengthened throughout 2020.
The Hash Rate
Bitcoin’s hash rate has seen incredibly strong growth this year. The amount of hash rate (computational work dedicated to finding the next bitcoin block) started off this year around 100 Eh/s — an immense amount of computational work.
By the end of October, this number had risen by about 50 percent to 150 Eh/s. The hash rate has dipped since October, but it is still up about 35 percent on the year.
This growth is very strong and serves as evidence that more bitcoin miners are entering the market, as well as evidence that current miners are investing to increase their hash rate.
This is an especially bullish data point considering the bitcoin block reward was cut by 50 percent in May of this year, directly impacting the amount of bitcoin that miners earn. Critics often refer to a “mining death spiral” — a situation in which the price drops in combination with the block-subsidy halving and causes bitcoin to fail indefinitely.
Many said that this could happen in 2020, however we have seen the complete opposite. We have seen sovereign nations nationalize their mining pools and effectively sell their hydrocarbons to the bitcoin network. We have seen large oil and gas companies invest large amounts of capital in order to mitigate their waste energy by converting that energy to computational work and mining the bitcoin network. We have seen nothing but growth in the bitcoin mining sector and, in my opinion, this is the most important indicator of bitcoin’s overall health. Bullish.
The impact that companies like MicroStrategy, Square, Galaxy Digital and others have had on legitimizing bitcoin in the minds of legacy investors cannot be understated.
Michael Saylor, CEO of MicroStrategy, alone has made serious institutional investors question the legitimacy of bitcoin. He forced intelligent people who had likely ignored or discounted bitcoin to take a second look and figure out what this magic internet money actually is.
Additionally, Square and MicroStrategy both released their “playbooks” as to why/how they decided to allocate a percentage of their cash on-hand to bitcoin. This kind of behavior causes every CTO on the Fortune 500 list to wonder if allocating a percentage of their company’s cash on-hand would yield a similar benefit to the treasury’s risk portfolio.
So far, MicroStrategy and Square have seen nothing but success from their decision to hold bitcoin as a corporate reserve asset — with $MSTR coming back for seconds and offering convertible senior notes in order to buy another $650 million of bitcoin at a price of about $18,500.
So, will this trend continue throughout 2021? Will we see other public corporations turn to bitcoin as a means to preserve excess cash on-hand? Likely yes. Bullish.
The Core Bitcoin Community Found Its Voice
With the help of many intelligent people who have taken the time to help educate the world about a better money, the Bitcoin community as a whole has become more fluent and can better articulate/defend Bitcoin’s characteristics.
I have noticed that, as central bankers and modern monetary theorists behave more and more erratically, the concepts surrounding sound money are more clearly highlighted. The Bitcoin community has done a great job at interacting with Keynesian ideas and challenging the debasement of fiat currencies this year.
We’ve (yes, I am a Bitcoiner) honed our message and solidified our convictions — we’re not going anywhere, nor will we be silent. We’re advocating for a tool that helps to create a more honest and fair world and we’re better at advocating than we ever have been before. Bullish.
Looking To 2021
Due to these facts, when I’m looking ahead to 2021 I can hardly contain my excitement. I am most excited to see how bitcoin mining impacts the energy production and power-generation industries. It is also exciting to see governments get involved in mining due to the fact that Bitcoin is an immutable energy-demand market. There is nothing to slow down this growth throughout 2021.
I fully expect more governments to announce some kind of oversight, nationalization and commitment to the process of mining bitcoin. I fully expect the network hash rate to grow above 275 Eh/s (about 100 percent growth from its current level) before the end of 2021. I fully expect the price to rise above $75,000 before the end of the year.
Am I irrationally bullish? Recklessly long? Yes — but that doesn’t mean I’m wrong.
What a time to be alive.
This is a guest post by Denver Bitcoin. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.