This week in Bitcoin price: Dec 22-28
With just a few days left in the year, Bitcoin hit another all-time high this week, briefly cracking the $28,000 mark on December 27th. Get some insight into the news behind the price with our latest weekly report.
Published on December 29th, 2020
The big picture
We saw Bitcoin hit another new all-time high this week, peaking just above $28,000 on December 27th. Despite the holidays, news around institutional adoption (which has been the big story throughout Bitcoin’s 2020 bull run) continued to emerge. Will we see continued corporate moves into Bitcoin in the New Year? And what will happen next?
Key points
As we head into 2021, corporations now own $30 billion worth of Bitcoin, with just 29 companies owning 5.48% of all Bitcoin. Most of these holders remain crypto-focused firms, but we’re also starting to see traditional funds making bigger investments in the space.
We’ve also seen more publicly-traded companies buy bitcoin this year. Payments processor Square, for one, has made significant gains on their $50 million investment from October. According to Bitcoin Treasuries, Square’s initial investment is currently worth around $126 million.
Another publicly-traded company, Hong Kong-based Greenpro Capital Group, announced plans to put as much as $100 million into a new Bitcoin fund.
We’ve also seen continued moves into the space by big private firms. This week, New York-based Skybridge Capital launched a Bitcoin fund with a $25 million investment. While the investment represents a minor portion of Skybridge’s $9.2 billion total fund, its founder favorably compared Bitcoin to gold in the "store of value" category. (Gold currently has a $10 trillion market capitalization compared to Bitcoin's $440 billion market cap.)
According to a survey of digital-asset investors by The Block, a majority believe that multiple S&P 500 companies will hold Bitcoin by the end of 2021, and roughly half believe that SEC approval of a Bitcoin ETF (or exchange-traded fund) will happen. A Bitcoin ETF would function much like a Gold ETF, which allows investors to get exposure to the asset (by buying shares in a fund) without having to hold it themselves.
Bitcoin vs. global currencies
One reason that big institutional investors have moved into Bitcoin this year is because it is seen to be a useful hedge against fiat currencies like the dollar. (Last week, after investing $745 million in Bitcoin, Ruffer Investment Management described the cryptocurrency as a "potent insurance policy against the continuing devaluation of the world’s major currencies.”)
In 2020 at least, that narrative has been an accurate one. As we’ve seen Bitcoin reach new highs compared to the U.S. dollar in recent weeks, it has also been hitting new highs against a range of other global currencies. If you compare Bitcoin to the G20 currencies (a group of 20 countries with some of the biggest economies), Bitcoin has appreciated against all of them significantly — ranging from 245% year-to-date against the Euro to 427% against the Argentine peso. (The U.S. dollar is in the middle, with Bitcoin gaining 277% year-to-date.)
Spotlight: global Bitcoin mining
One Bitcoin indicator that’s worth paying attention to is the mining power backing its network — because more mining power equals a more secure and censorship-resistant network. And indeed, as Bitcoin’s price has climbed this year, so too has mining power.
One concern critics have about Bitcoin mining is that too much of it is concentrated in one country: China. The worry is that Bitcoin isn’t actually effectively decentralized if too much of its network is hosted in one nation.
Reports show, however, that China’s share of global Bitcoin mining fell 10 percent between 2019 to April 2020, according to Cambridge researchers. Bloomberg reports that the new year could bring further mining distribution abroad thanks to cheap hydroelectric power in Nordic countries, and as public companies such as Marathon Patent Group and Riot Blockchain invest in North American mining infrastructure.
As Bitcoin becomes increasingly geographically distributed, its network becomes increasingly resilient and decentralized. If you want to learn more about crypto mining and why it’s critical to Bitcoin’s decentralized network, check out this explainer.
Bitcoin and DeFi
As Bitcoin’s price has surged this year, we’ve also seen growth in the digital currency’s use in Decentralized Finance (see What is DeFi to learn more). For one example, let’s look at a protocol called Wrapped Bitcoin (wBTC), which allows Bitcoin to be used by Ethereum-based DeFi applications for lending, borrowing, and trading. At the start of September 2020, wBTC’s market cap was less than $500 million. Today it’s over $3 billion.
