It happened!
After multiple tries and fails, Bitcoin has done it! It smashed through the $20,000 mark like it was no one's business and has continued up to $20,800 at the time of this writing. I cannot help but get a chuckle out of the people who just a week ago were saying that Bitcoin was in for a big correction and ignored the fact it had already had its big correction.
Background
Bitcoin has gone through boom and bust cycles before. These boom cycles then follow with approximately a 15%-35% correction. In November Bitcoin underwent a correction of ~16% which fulfilled this criterion. Once this happened Bitcoin bounced back up and has since traded back in the $18,000-$19,000 range. This range allowed for support to form and to cement the idea that the correction had taken place. When previous boom and bust cycles had occurred there was a sizable lack of something that is no longer lacking and that is institutional investors. These further added support and importantly big-time buying power for if the price went down too much. As more and more large companies and corporations bought Bitcoin I came to believe more and more that these people are smart. They know a lot of stuff and a lot more stuff that I do not know about. They would not light hundreds of millions of dollars on fire for the world to see. That was an impossibility as the consequences are far too severe to allow this to happen.
So What Had Happened?
What had happened with Bitcoin appeared to be pretty apparent to me. At the heart of every human experience is the psychological mind and how that is impacted or impacting things. The $20,000 mark was huge not just because it was an all-time high and not because it was a nice even round number (believe it or not that is a very important thing to consider with record-setting is how the number appears which I will explain more about later) but because of the flashbacks to the crash of 2017. A lot of people lost a lot of money and lost it all quickly. When you add this problem faced with the pandemic we are currently in and people have a right to be very concerned about how all of this shakes out. Jobs and money are very hard for a lot of people to have access to even with governments printing it like it is going out of style. People are unable to pay for basic things like housing so losing any money is bad but losing it to something like Bitcoin would be 110% devastating. When this fear was able to be conquered which was helped a ton by companies like PayPal and MicroStrategy it allowed the $20,000 mark to be marched right through!
Psychology Behind the Number $20,000
A fun little fact about the number at hand $20,000 that was going to hamper it was the fact it was a whole number that was set nice and round. Numbers that end "perfectly" like $5,000, $10,000, $15,000, $20,000 and $25,000 all face similar barriers with your brain. It is why for instance most things you buy do not end in zeros. A person is much much more willing to buy a product for $1.99 than $2 and will even tend to buy the item for $2.99 over $2.00 as there is a mechanism in our brain that wants to avoid the zeros. Some research I have read over the years has attributed this to the fear of hole by some people and I was told by a professor it even could deal with deadly animals as it looks like eyes.... the brain is really an interesting thing to study and you would be shocked by the odd things humans do like this!
Where Next?
There are a couple of different things that could occur over the next day or two and it is really hard to judge how the human mind is going to work. Baring any outside factors like COVID, government, or economic issues it is not very clear. The next barrier is going to be $25,000 as this will impact the human mind from the side of being another "perfect" number to people also thinking of it as 1/4 of $100,000.
With this in mind, I would not expect to see a huge runup of several thousands of dollars soon. I easily see a new range emerging that would run $19,900-$23,000. This would be within the charts and within the psychology of money. Being stuck in this range would again allow for support to really build at the $20,000. There is an outside chance that Bitcoin will act much like it has and run to the upper end of the range to something around $23,000 to $24,500 but this would be much much harder to push through not because of it being too expensive but the mental push that would be required.
Final Thoughts
Bitcoin will most likely end the year comfortably above the $20,000 mark and below the $25,000 mark. The idea of crazy price falls for any sustained periods of time are really over. Corrections of 30% are gone barring any law changes or other issues and corrections over 10-15% are really done for now too. With institutional money involved now, the crazy price swings are going to be in the coins and tokens that do not have this. Bitcoin really is taking the shape of digital gold. I do not think it will be as much of a store of value as gold is and I feel it will continue to be traded a lot by ordinary people but it has all really changed.
I know some people are very against big companies coming in and buying a lot of it as they think it will take away from how Bitcoin was supposed to be. Bitcoin though is paving a way for all the other cryptos though and blockchain. It might lose some of its decentralization and it might not be as accessible to the average person as it once was but it is still much more accessible than the older financial system. It is still a very liberating thing but in order for the goal of decentralization and liberation to take place, Bitcoin has to undergo this change but it's not a bad change at all it's an advancement.
I hope you enjoyed this article and maybe learned a little about Psychology from it! I would love to hear comments or suggestions below! If you enjoyed it and would like to further support me I have referral spots available on Coinbase Earn for Compound (COMP), Band Protocol (BAND), and Stellar Lumens (XLM)! I have attached my links below if this interests you! Thank you for reading and stay safe out there!
Compound https://coinbase.com/earn/comp/invite/86ztmj3w
