When the price of Bitcoin tore its way to almost $20,000 in December 2017, the bull run was fuelled mainly by retail FOMO. Hardly anyone buying it knew what it was or how it worked. They just saw it rising in value and making a lot of people rich overnight.
But Bitcoin wasn’t ready for wide adoption. Transactions were bottlenecked, fees were high, scams were abundant, and the legal panorama was fuzzy at best. However, a lot has changed since then. Here are at least five reasons the Bitcoin bull run is different from 2017.
1) The market fundamentals are much stronger
I received an email yesterday with a report from SFOX – an institutional crypto assets dealer – revealing why Bitcoin’s current $11,000 is different from 2017. Today, it’s heading for $13,000, and who knows what tomorrow will bring?
While it looks like analyst Tom Lee may have been right predicting that retail FOMO would kick in at over $10,000, this new Bitcoin bull run is far more likely to last longer.
Actually the point of the chart is to say “real FOMO” probably starts when #bitcoin exceeds $10,000 as that is a price level only seen 3% of all days…
…mathematically equivalent to exceeding $BTC $4,500 in 2017
Looking back, that price was a level that indeed triggered FOMO
— Thomas (Tom) Lee (not drummer) FSInsight.com (@fundstrat) May 29, 2019
The industry is so much better placed than it was in 2017. Throughout the bear market, Bitcoin has been building. Usage is up, as is transaction speed, hash rate, and block sizes. These are all key for onboarding more users without the issues suffered a year and a half ago. Better than that, transaction fees are down by 68%.
Bitcoin first hit $9,000 USD on Nov 27, 2017.
Now that Bitcoin is back at $9,000, what has changed? pic.twitter.com/TY5RMQecES
— Kevin Rooke (@kerooke) June 17, 2019
You may notice that payments and volume are down as well. But these are key indicators that Bitcoin has transformed from a payment system to a store of value. More people are HODLing than before, and there ain’t no one buying a pizza with BTC.
2) There are far fewer scams this time around
In 2017, cryptocurrency was still being referred to as the “Wild West”. When people heard the word Bitcoin for the first time, their minds often leapt to the dark web, hackers, or clandestine dealings.
Bitcoin had yet to receive the official nod from the US SEC that it was not considered a security under its draconian laws. And people were being conned out of their funds left, right, and centre.
It’s true that you still have to be careful out there. In the first quarter of 2019 alone, already more than $1.2 billion worth of cryptocurrency has been stolen through fraud.
However, security has improved greatly, usability is better, people are taking more time to educate themselves, and Bitcoin is finally casting aside its connotations of criminal deeds.
3) Big businesses are on board and lending credibility
In 2017, big businesses were staying away from Bitcoin, with the notable exception of Microsoft and a handful of others. We had the head of JP Morgan Jamie Dimon calling Bitcoin “stupid” and all large banks urging customers to stay away.
In 2019, JP Morgan has its own cryptocurrency (if you want to call it that) and, rather than just accepting payments in Bitcoin, Microsoft is now building on the Bitcoin blockchain. Then there’s Whole Foods, eBay, and, of course, Facebook. SFOX states:
“The current rally corresponds with at least two major news items for retail and institutional investors: details of Facebook’s crypto project, Libra, and BTC mining company Bitmain’s pursuit of a US IPO. This is the kind of validation for the sector that was largely hypothetical back in 2017.”
4) Institutional investment is reaching an all-time high
Just like big businesses, in 2017, institutions were still looking on at this whole new asset class with a mix of awe and caution. Today, accredited investors and institutions are getting in at a premium. They’re literally scrambling to scoop up Bitcoin before it’s too late. In other words, institutions are FOMO-ing in.
Bitcoin is trading at over $11,000 on Bitcoin Invesment Trust (GBTC) with a 37% premium over exchanges.
AUM of GBTC alone surpassed $1.2 billion this week.
Seems like a strong indicator of a rise in interest from accredited and institutional investors. @barrysilbert pic.twitter.com/SU87zuetch
— Joseph Young (@iamjosephyoung) May 29, 2019
In 2017, we had CBOE and CME about to launch their Bitcoin futures products, several hedge funds, and a few blockchain investment firms, but zero major names. Now, firms like Fidelity are storing Bitcoin, Bakkt is entering the space at some point, and major firms like TD Ameritrade are trading it. This Bitcoin bull run is nothing like the last and could have real legs.
5) Bitcoin is being debated at the highest level
Bitcoin has now overcome the first hurdle, which was the SEC stating that it was not under its purvue. Yet meaningful regulation has yet to take shape in most corners of the world.
However, there are countries like Malta and states like Wyoming blazing the trail as Bitcoin and blockchain-friendly. The conversation about this digital asset has extended beyond dinner parties all the way up to the US Congress.
Democratic party presidential candidate hopeful Andrew Yang has even pledged to push through the Token Taxonomy Act in the US if he gets voted in. This will exempt many cryptocurrencies from being labelled securities in the United States.
This Bitcoin bull run could easily surpass that of 2017
While there are never any certainties when it comes to investing, be it the stock market or cryptocurrencies, this wild price run is definitely different from that of 2017.
Bitcoin has done a lot of growing up since then, and the dialogue has reached the highest places. Major corporations are entering the space, institutions are racing to get in on the action, and now it seems that retail traders are interested once more to see just how high this could go.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.