Bitcoin (BTC) price rose to an all-time high on Wednesday, surpassing $ 20,000, indicating strong momentum for the main cryptocurrency.

Although it’s easy to draw parallels between this year’s beef market and the speculative frenzy that led to the 2017 rally, the foundation behind Bitcoin is much stronger today than it was only a few years ago.

Bitcoin as a hedge
Although there are several accounts that may explain Bitcoin’s comeback this year, it is important to start from the beginning. Unlike in 2017, today investors are acquiring bitcoins with a clear purpose. The effectiveness of a digital currency as a hedge against inflation leads to a wider adoption, especially among experienced investors who have an understanding of monetary policy.

From the start, Bitcoin has been the best store of value than any other asset. The deflationary halving incident in May 2020 was a sign of Bitcoin’s scarcity to a wider audience than ever before.

As Crypto Analyst firm Chainanalysis reported last month:

“[…] First-time bitcoin buyers and buyers who wish to issue a Bitcoin fiat as a defense against worrisome macroeconomic trends are responsible for much of the current demand.”
Institutional demand
2020 could be the year in which large organizations have converted the scenario to bitcoin – maybe forever. In contrast to 2017, when Bitcoin’s rise was mainly driven by retail speculation, it appears that the bull market in 2020 will be driven by cold, smart money hands.

Cointelegraph has reported the gradual adoption of Bitcoin by institutional investors for several months now. Paul Tudor Jones, Stanley Druckenmiller, Grayscale, PayPal, Square, MassMutual, MicroStrategy, and Ruffer Investment Company are just a few of the corporate and institutional names that have added Bitcoin to their assets.

Even Jim Kramer, the popular TV presenter on CNBC’s Mad Money, recently bought less than $ 18,000 in bitcoin.

These names were absent from the retail euphoria in 2017, when FOMO, or fear of losing something, was the main catalyst for Bitcoin’s short-term jump to $ 20,000.

The emergence of non-liquid portfolios
Another striking difference between the beef market in 2020 and its predecessors in 2017 is the amount of Bitcoins stored in so-called illiquid wallets.

The chain analysis describes illiquid portfolios, also called bitcoins, that investors hold as wallets that send less than 25% of the BTC they have ever received. According to this account, illiquid portfolios currently account for more than three quarters (77%) of the 14.8 million Bitcoins recovered and are not considered lost. Analysis of the series indicates that this sum “has not moved from its current address in five years or more”.

The company explains:

“This leaves only 3.4 million Bitcoins for buyers as demand increases.”
As shown in the following chart, the number of investors owning bitcoin has increased since the end of 2017, when prices last reached their peak. In other words, investors buy and hold BTC instead of dumping it for quick profits.

A stunning contrast between Trader Bitcoin and Investor Bitcoin from 2017 by Chainanalysis
Stable growth of active addresses and portfolios of at least 0.1 BTC
According to data provider Glassnode, unlike in 2017, when Bitcoin network activity peaked when the price of BTC peaked, the number of unique active addresses has increased steadily over the past two years.

Number of unique active bitcoin addresses versus Glassnode price
Additionally, nearly 19.6 million bitcoin addresses were sent or received in November, the third-highest monthly amount in history.

Glassnode data also shows that by June this year, a record number of investors had at least 0.1 BTC. According to the Cointelegraph report, more than 2.75 million titles since April 2019 have more than that amount.

Source: CoinTelegraph