What is the outlook for Bitcoin's price in 2020?

What is Bitcoin, and How Did It Become So Popular?

Before delving deeper into this topic, let’s first look at what Bitcoin is and how its price has reached its current level.

The concept of Bitcoin was invented in 2008 by an anonymous programmer named Satoshi Nakamoto, who wrote a white paper discussing the possibility of a decentralized digital currency that could be sent over a peer-to-peer network without the need for a central bank or a single administrator.

Bitcoin was essentially created as an alternative to traditional cash and credit transactions, to be used for purchasing goods and services. In 2009, the first Bitcoin transaction took place between Satoshi Nakamoto and an early adopter named Hal Finney.

Then in 2010, another early user paid 10,000 Bitcoins to a U.S. pizza restaurant called Papa John's to purchase two pizzas worth $25. This became the first commercial transaction in the world using Bitcoin.

By 2011, nonprofit organizations like WikiLeaks began accepting Bitcoin donations. A year later, online publishing platform WordPress became the first commercial entity to accept Bitcoin payments.

Soon after, Bitcoin evolved into a tradable asset, and the world’s first cryptocurrency exchange—bitcoinmarket.com, which has since shut down—went live. In 2013, Bitcoin reached parity with the U.S. dollar for the first time.

Over the following years, Bitcoin went through a series of ups and downs, with its trading price hovering reasonably between $400 and $750 per coin, until a breakout occurred in 2017. Trading volumes on some exchanges surged by 1,500%, pushing the price to an all-time high of $19,783.06 on December 17, 2017.

The rise of Bitcoin as an investment tool also gave birth to other cryptocurrencies, including Ethereum, Litecoin, Ripple, and Facebook’s Libra (launched later that year). Today, there are over 2,000 digital currencies in the market.

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Bitcoin Price Chart from September 2016 to January 2020 (Source: IG)

How Did Bitcoin Prices Change in 2019?

After the peak in the winter of 2017, the Bitcoin bubble began to burst, and the price dropped by over 50% in just four months. By April 2018, Bitcoin’s price fell to around $7,000 per coin and hit a low of $3,500 by the end of the year.

However, the following year proved to be much better for the cryptocurrency network. At the beginning of 2019, Bitcoin was priced at just $3,717 and then climbed to a 52-week high of $12,701 on June 28.

This exponential growth seemed to occur alongside increasing mining difficulty—the measure of how hard it is to generate a Bitcoin. Around mid-2019, as the price peaked at a 52-week high of $9,000, mining difficulty also rose by 11.26% to 7.46 trillion, setting a new record.

The hash rate, which measures processing power and network security, also reached a then-record high of 74 quintillion hashes per second in August 2019. A higher hash rate means the Bitcoin network is harder to hack, thereby increasing its value.

The second half of 2019 wasn’t as strong. Bitcoin prices began to fall, eventually dropping about 43.5% from their summer peak, closing the year at $7,120 per coin.

What Is the Bitcoin Price Forecast for 2020?

The year began moderately well for digital gold. As of January 7, the price had already risen over 14% (nearly $1,000) since the first trading day of the year (January 2), reaching $7,885.

One analyst—Antoni Trenchev, co-founder of crypto lending platform Nexo—predicted that Bitcoin could rise by 635% to reach $50,000 by the end of 2020.

Trenchev told Bloomberg TV, “Our analysts have done very thorough research. With miner rewards decreasing, Bitcoin is approaching a challenging period. The last time this happened, the price of Bitcoin surged by 4,000%.”

Trenchev was referring to the upcoming Bitcoin halving event expected later that year. According to bitcoinclock.com, the halving could occur as early as May 11, 2020.

Bitcoin halving refers to a 50% reduction in the number of new Bitcoins issued. New Bitcoins are generated every ten minutes, and this number halves roughly every four years.

In the first four years after Bitcoin was created (2008–2012), 50 new Bitcoins were created every ten minutes. In 2012, this fell to 25; in 2016, to 12.5; and in the 2020 halving, it was set to fall to 6.25.

With the supply of Bitcoin decreasing and demand remaining stable, the price is expected to rise significantly. After the first halving in 2012, Bitcoin’s price surged 930% in the following months. The 2016 halving laid the groundwork for the price boom of 2017.

UK asset analyst Bill Charison said that even if prices haven’t yet reached such levels, a $10,000 target—or at least a 25% increase from current prices—is increasingly becoming a realistic scenario.

He pointed out that the charts of gold and Bitcoin are “strikingly similar,” and if Bitcoin continues to track gold’s movements closely, it could reach five-digit territory as early as February.

With mining difficulty and hash rate reaching record highs of 13.8 trillion and 98.67 EH/s respectively, the bullish outlook for Bitcoin is once again becoming more certain.