Time keeps going forward. More and more events stay in the past. These events have forced us to react, make decisions, take action. By doing this, we shape our life experiences.
Experience plays an important role in investing. He separates successful investors from bankrupts. Therefore, it is necessary to look back time-to-time and analyze your decisions and actions.
One of the main tenets of trading says: History repeats itself. This means that price changes and the events that influenced them may recur. And by analyzing them, you can find patterns and use them to predict price behavior in the future.
In early 2020, bitcoin hit the nerves of investors a lot. In March, its price dropped below $ 4000. There have been pessimistic statements that the main cryptocurrency will collapse. And this would be quite logical because history knows many examples when the price of an asset, under the influence of panic in the market, went into a steep peak. But bitcoin escaped this fate. Its price started to grow and in 3 months confidently fixed itself above $10000. And in December 2020 it reached 30000. Of course, the rise of bitcoin has led to the growth of alternative coins.
Let's take a look back at 2020 and recall the main events affecting cryptocurrencies.
At the beginning of 2020, there was another halving in the bitcoin network, the third in a row. This event occurs every four years and halves the miners' reward for each mined block. Despite this, Bitcoin mining has remained a profitable business. The difficulty of mining bitcoin and the hash rate have grown to record values. This means that the total computing power of mining equipment has increased. As a result, the transaction processing speed increased, and the network operation has stayed stable.
The COVID-19 coronavirus pandemic that erupted in early 2020 has led to a global economic crisis. The value of currencies and other investment instruments has dropped significantly. In this situation, Bitcoin retained its value and continued to grow. Investors used Bitcoin as a safe-haven for capital preservation and risk-sharing. This further pushed cryptocurrencies to growth.
In addition to private investors, large investment companies have shown more interest and confidence in cryptocurrencies. They bought cryptocurrencies with a long-term growth perspective and also considered it as a tool for diversifying portfolios. The billions of dollars invested in the decentralized finance industry in 2020. It has provided tremendous support for Bitcoin. In 2017, Bitcoin only grew with the hype created around it. And in 2020, bitcoin grew with the support of institutional investors. Therefore, it is likely that in 2021 currency prices will keep growing smoothly, without sharp fluctuations.
Central Bank Digital Currencies (CBDC).
In 2020, China made a breakthrough in the use of central bank digital currencies. The government has launched an experiment to use state cryptocurrency in selected cities. The experiment involved four state-owned banks and more than 20 companies. People actively supported this initiative and actively applied for participation. The experiment continues. Perhaps very soon, the digital yuan (Digital Currency Electronic Payment, or DCEP) will replace cash. And after China, other states will introduce this technology.
Control and regulation.
Governments and corporations do not want to lose control of financial flows. In 2020, there have been successful attempts to control the emission and use of cryptocurrencies. The SEC has banned the emission of the TON cryptocurrency under the pretext of violating tax laws. The creators of this coin had to return $ 1.2 billion to investors and abandon the issue. The SEC also filed a lawsuit against Ripple for the sale of unregistered securities. Government institutions and banks in America, Europe, and Asia are developing mechanisms to maintain control of the cryptocurrency market. New bills, licensing requirements for crypto activities, and other ways of influence will appear.
Other important events.
The largest cryptocurrency exchange Coinbase enters the stock market. Information about this appeared long ago, but in December 2020, plans turned into concrete actions. Coinbase has applied for an initial public offering. This will increase trust both in the crypto exchange itself and in the entire cryptocurrency industry.
There are also improvements in the use of bitcoin as a daily payment unit. PayPal received a license to conduct operations with Bitcoin and other cryptocurrencies. And now, any user of this payment service can pay for their purchases with cryptocurrency. Unfortunately, significant fluctuations in the bitcoin rate still prevent it from becoming a stable means of payment.
2020 was a very unusual and eventful year. Knowing how cryptocurrencies reacted to some events, you can predict their behavior in the same situations in the future. All positive and negative news shows that bitcoin and the entire cryptocurrency industry is developing and changing the world.
Everyone who believed in blockchain technology and invested in cryptocurrencies is now making a profit, including Zion Finance. We continue to act and invite investors to join us. Each new obstacle and each new challenge allows you to find solutions, remove flaws and gain experience.