Whether due to a lack of trust in a country’s financial system or simply because new speculators want to make money, everyone’s talking about Bitcoin again.
The world’s largest cryptocurrency has been making the headlines in the mainstream press from Bloomberg to the BBC. And the question everyone wants answers to is – how profitable will Bitcoin be in 2020?
Bitcoin talk in the mainstream press
Bloomberg published an article on December 31 stating that BTC had yielded early investors an eye-watering 9,000,000% rate of return on its starting price.
Bitcoin's 9,000,000% rise this decade leaves the skeptics aghast https://t.co/9556D4B4aO
— Bloomberg (@business) December 31, 2019
Sure, not everyone was buying Bitcoin back in the days when it was “magic internet money”. But there’s still no other asset in the world that can even come close to such an astonishing ROI.
Demand for Bitcoin has been steadily on the rise, especially in developing regions such as Latin America. The world’s number-one cryptocurrency was featured in Argentina’s most prominent national newspaper La Nacion last week.
The article posed the question, based on its performance over the last decade, how profitable will Bitcoin be in 2020?
Bitcoin in times of uncertainty
You only have to take a quick look at statistics from peer-to-peer Bitcoin trading sites like LocalBitcoins to see how Bitcoin in Argentina is on the rise, hitting an all-time high in trading volume in the run-up to Christmas.
🚀Venezuela, Argentina Set New Weekly P2P Bitcoin Trading Volume Records 🚀Bitcoin (BTC) weekly trading volumes on peer-to-peer (P2P) trading platform LocalBitcoins in Venezuela and Argentina have hit new all-time highs in their respective national currencies #liquiditex.com #lex pic.twitter.com/LL89hPxyMv
— Liquiditex (@liquiditex) December 28, 2019
As the government clamps down further on access to the US dollar and other foreign currencies, demand for Bitcoin increases.
“It is better than gold as a refuge for capital when there is a crisis,” Javier Pastor, commercial director of the Bit2Me cryptocurrency exchange, told BBC Mundo. Bitcoin purchasing in Argentina certainly follows this pattern.
The spikes in buying Bitcoin all occurred when the political climate was particularly tense and capital controls were imposed. This is a trend that we see clearly in countries with hyperinflation like Zimbabwe or Venezuela, and also at times of global tension.
After Iran’s attack on US military bases in Iraq in response to the death of Iranian General Qasem Soleimani, Bitcoin rose 8% amid investor uncertainty. So, can we expect these conditions to continue and do we really want to profit from conflict and global turmoil?
Maybe not, but Bitcoin does seem to do better in times of trouble as Pastor commented.
He added, “My projection is that in 2021 Bitcoin will reach more than $100,000,” claiming he’s convinced that digital money will completely transform the financial system in the future.
How profitable will Bitcoin be in 2020?
For anyone following Bitcoin’s trajectory, it’s been a wild ride. Its high volatility and the plethora of exchange hacks and scams always grab the headlines.
But even those who regularly trash Bitcoin, such as CEO of Euro Pacific Capital Peter Schiff or University of New York economist professor Nouriel Roubini, can’t deny the numbers.
When it was created by Satoshi Nakamoto in January 2009, Bitcoin was worth less than a dollar. In 2017, it rose to almost $20,000 only to crash back down to just over $3,000 the following year.
Despite all the leaps and plunges, Bitcoin has certainly been profitable. In fact, as mentioned earlier, those who bought Bitcoin at the beginning have experienced a return of 9,000,000%.
So, how profitable will Bitcoin be in 2020 and the coming decade? This is the question on everyone’s lips from Argentina to the UK, South Korea, and anywhere else in the world.
The case for a strong Bitcoin by year-end 2020
There’s no shortage of price predictions for the value of Bitcoin by the end of 2020.
Crypto lending platform Celsius Network founder Alex Mashinsky believes that Bitcoin will be worth $30,000 by the end of the year. “The future of cryptocurrencies is promising,” he told BBC Mundo.
https://twitter.com/Mashinsky/status/1220829688312016896
Mashinsky bases his optimism on the fact that Bitcoin is a scarce asset with a capped supply of 21 million, “which guarantees its long-term success”.
Moreover, he compares Bitcoin’s 11-year performance with the best-performing stock Netflix. While Netflix scored early investors a wild return of 4,000%, that pales in comparison to Bitcoin.
He’s not alone in his bullish outlook. In fact, several other industry experts believe it will be even higher than that. Antoni Trenchev, the co-founder of Nexo, projects Bitcoin’s price to hit a high of $50,000 towards the end of 2020.
The Bitcoin halving in May 2020
Another factor behind Bitcoin’s price beyond geopolitical tensions and an uncertain global economy is the upcoming Bitcoin halving in May, which happens every four years and will slash the block reward for miners in half.
Historically, each Bitcoin halving has sparked a Bitcoin bull market, and many in the industry are convinced that this year’s halving will have the same effect.
After the previous two halvings – in 2012 and 2016 – there was an increase in the price of Bitcoin of 8,000% in the first case and 2,000% in the second.
#Bitcoin increased 12,000% in each of its previous Halvings
Halving 1: Low of $2 to $270 in 513 days
Halving 2: Low of $160 to $20,070 in 1068 days
Next Halving: With low of $3150, 12000% gain means $385,000
Making BTC Marketcap greater than Gold's Marketcap ($8 trillion)
— Shalini⚡ (@DesiCryptoHodlr) January 20, 2020
“That will cause a price increase for sure,” said Pastor. However, not everyone is in agreement, citing different conditions this time around and no guarantees simply based on past performance.
The case against Bitcoin in 2020 and beyond
There are still many who maintain that Bitcoin is a bubble and a scam, claiming that the market is rife with manipulation and investors better beware.
For example, Roubini has previously described Bitcoin as “the mother of all bubbles”, saying that it is dominated by “quacks and scammers”.
He argues that “cryptocurrencies have given rise to a completely new criminal industry, which includes unregulated extraterritorial exchanges, paid propagandists, and an army of scammers seeking to keep the money from the minority investors.”
Other economists staunchly opposed to Bitcoin include Nobel Prize winner Joseph Stiglitz. He has gone so far as to say that it “must be outlawed” as it was made to evade regulations and “does not serve any useful social function”.
Joseph Stiglitz: Bitcoin ought to be outlawed https://t.co/9vC8Mw0vWZ pic.twitter.com/Ryb60qbvWB
— World Economic Forum (@wef) December 23, 2017
Cases of fraud, theft, and other incidents have also made investors more cautious, with more than $4.4bn in cryptocurrency stolen in 2019 alone. If you look at investing in Bitcoin under this lens, in all likelihood, you’ll take a second glance.
More regulation is on the cards for 2020 as well. This could be a double-edged sword for Bitcoin and the cryptocurrency market.
Tighter regulation may force some exchanges out of business and may cause some coins to be delisted. However, a regulated market may also help to lure more institutional investors to the table.
Wrapping it up
So how profitable will Bitcoin be in 2020? That honestly remains about as predictable as the weather. That’s part of the fun of buying Bitcoin after all.
If you believe in the fundamentals of the technology, if you understand its use case and its value, you’ll expect that Bitcoin will be profitable in 2020 – and well beyond.
But if you’re from the investment school of Warren Buffett or Nouriel Roubini, you may expect it to go to zero.
Only time will tell whether Bitcoin will be digital gold or a flash in the pan, but it certainly makes an interesting case – and with a 9,000,000% rate of return, it has certainly been profitable in the past.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.