Author: Mary Ann Callahan
If there is one obvious financial success story of the last couple of years, it is Bitcoin. While many people still don’t understand what it is and how it works, some are making fortunes off it through trades on the financial markets or simply using it to buy and sell with. This is money you can’t actually touch or see as a physical object. But it’s driving careers, and it could well be driving economies soon.
Currently, you can buy Bitcoin on the major exchanges for about $18,000 (December, 15). The current boost in its fortunes is down to a few factors. The media is fueling a Bitcoin frenzy, for example. At the same time, the recent splits in the Bitcoin network has scaled up the trading process and attracted more investors into Bitcoin with a view to free coins (Bitcoin Cash, Bitcoin Gold, etc.)
So what is Bitcoin?
How did it all begin?
To understand what Bitcoin is, we need to go back in time to the person or persons that are believed to be the creators of the currency. There is a person called Satoshi Nakamoto, and he or she, or they, hold the key to what Bitcoin is.
Nakamoto invented something called The Bitcoin Protocol, and that happened in November 2008 when a paper was published through the Cryptography Mailing List. A year later, Nakamoto released the software client effectively ‘inventing’ Bitcoin. By 2010 he was nowhere to be found.
So this means that the creator of one of the most groundbreaking financial events in decades is now missing. Recently, things got really strange as people started to speculate over the identity of the financial genius. Some people became obsessed with knowing his origins and traced the domain registered to Japan, for example.
Why use it?
Bitcoin has no centralized control. The real money we use in our individual countries is controlled (mostly) by a central bank institution. These bodies set interest rates and generally decide how much money is worth and what it buys.
There is no such issue with Bitcoin. In fact, Nakamoto most likely wanted things to be this way. By creating something that wasn’t physical and had no centralized control, Nakamoto was essentially trying to create a brand new kind of currency.
This is the fundamental reason why so many people are excited about Bitcoin. It has no authority power, it just exists. The market will give the currency a value which will rise and fall accordingly, but that’s about as much ‘oversight’ as the currency has. In the end, if you own Bitcoin, you’re owning a currency that is truly democratic.
A success story
Bitcoin has had an amazing history since it was first widely traded. The volatility of the currency is such that, at times, it has moved up and down in value within days.
2011 – 2013. First real exposure from $0.3 to $13
Back in 2011, Bitcoin hit the 1.00 USD value. However, in June that year, something remarkable happened, and it offered signs of what was to come. The site Gawker published an article about The Silk Road (an online trading site that was part of The Dark web). The value of Bitcoin (which was used on the site) went up to $9.21 and continued growing despite negative publicity. Since then, there were no considerable shake-ups for Bitcoin, and by the beginning of 2013, it was valued at $13.40.
2013 – 2014. The Silk Road closes; Bitcoin tops to $1,000
This is when the great story began. Within this time frame Bitcoin price surged from $13 to $900 with its peak rate of $1,000 in November, 2013, as the interest from China grew.
2014 – 2015. Mt. Gox closes; Bitcoin down to $540
There was a famous Bitcoin exchange called Mt. Gox in Japan. In 2014, Mt. Gox closed after millions of dollars in user funds were stolen. This affected the value of Bitcoin, which went down to $547.09. Prior to that, in February of that year, it had hit an incredible $717.83. By the beginning of 2015, Bitcoin price was showing a steady downward trend and ended up at $300.
2015-2017. Bitcoin gains wider adoption and hits $1,000 again
That was a leap, but only a fraction of the value that would be part of 2017. Bitcoin received much attention both from governments, who started to examine potential regulations for it, and businesses, who introduced Bitcoin as a payment method.
2017. There is no stopping Bitcoin
January 2017 – Bitcoin breaks $1,000
January 2017 became a starting point for Bitcoin price hitting new all-time highs. A huge amount of press coverage had only served to increase the public’s hunger for the cryptocurrency. This resulted in Bitcoin breaking the “$1,000 barrier”. The press attention had effectively buoyed up the price and created more demand for Bitcoin.
March 2017 – SEC and the Winklevoss brothers
By March 2017, Bitcoin was up to $1,200. The Winklevoss brothers (known for allegedly helping to create Facebook) applied for the permission to open an exchange-traded fund (or ETF) so that people could trade Bitcoin more easily. The SEC denied them this opportunity. The price of Bitcoin lowered a little to $1,037.85.
April 2017 – $1,320
Another rally behind Bitcoin happened in April, with Japan formally recognizing Bitcoin as a currency. This provided a boost to the currency value. The question around legislation like this was mulled over by the government for months.
August 1st, 2017- $2,785
The most significant event in the history of Bitcoin occurred at the end of the summer in 2017. Bitcoin was split in two to welcome a new cryptocurrency – Bitcoin Cash. The ‘SegWit’ upgrade that took away the problem of incredibly slow transaction speed made for a long-term opportunity to scale up. This means that larger trades can happen, and they can happen faster. It was the boost of confidence the Bitcoin industry needed.
The latter half of 2017: to the moon. $3,000 – $18,000
The split has happened, and now Bitcoin is much more valuable than gold (1,258 USD/oz as of the time of writing). It is now a question of what we can expect to see in the months ahead.
Bitcoin is a tremendously exciting unit of currency, but it still has to prove value to investors. Its price is so high now because it is relatively new, and it is incredibly unpredictable.
One key factor here, according to many people, is the freedom the currency gives to everyone. If they can buy it, they can trade it. This means that it is the first truly democratic currency in history.
2018 under the probable case scenario…
There are a few features of Bitcoin that suggest an even bumpier ride in 2018:
● The volatility, with prices plummeting and then ramping back up within hours;
● If it hits real-world purchasing, it will be unstoppable, and a direct competitor to other currencies in the world;
● More and more people are becoming aware of it, and this will increase the volatility of Bitcoin.
However, as an asset that is volatile and in high demand, it doesn’t really belong in real-world purchasing. So the particular outcome is hard to see right now. The biggest thing here is the trust of investors in cryptocurrency and willingness to believe the currency will go above the current price.