Bitcoin hit headlines in 2017 after achieving tremendous exponential growth in the BTC to USD rate throughout the calendar year. Bitcoin defied expectation from speculators in Wall Street and made a lot of new millionaires in the process.
On Jan 1st, 2017, Bitcoin started trading at less than $960 mark and by the end of the day reached close to hitting the 3-year high of $1,023. By December 2017, the price had hit a new record high of $20,000, which is translated to a 2000% increase. To put this in perspective, if you had had 100 Bitcoins worth $100,000 at the start of the year, by the end of the year they would have been worth $2 million - not too bad! Bitcoin has since dropped the price more than half reaching $6,600 on 14 June 2018, but it has still remained the most popular and valuable crypto in the market.
The Beginnings of Bitcoin
To grab a clear picture of Bitcoin’s bullish price run, it is important to consider it from a historical perspective. Bitcoin was invented with the aim of being a decentralized currency for everyone. In terms of Bitcoin, decentralization means the currency is devoid of control from any central bank or government entity and basically, the currency vouches for itself.
Through a peer-to-peer network, Bitcoin users can transfer their wealth to any other user directly avoiding middlemen and thus make the transaction process more secure. All transaction records are distributed among the peers on the network, which excludes any central point of failure. Decentralization prevents big corporations or institutions from controlling the trade. It brings power back to the people, where no one including governments can prevent users from managing their personal finances.
While the development began back in 2007, the first Bitcoin transaction took place on January 12, 2009, between the inventor Satoshi Nakamoto and another crypto activist. In those days, Bitcoin was worth almost nothing and was used only by techies.
- Somewhere in Jacksonville, Florida, one such techie paid for a pizza with his Bitcoins. The transaction was carried out by a programmer exchanging 10,000 Bitcoins for two Papa John’s large pizzas (around $25 per pizza).
Since then Bitcoin has taken an upward trajectory with the price increasing steadily over the years. Here are some factors that have led to the price surge:
**Factors that lead to Bitcoin’s price surge **
Hype
● The Silk Road story. The Dark web has always been a hub of anonymous content that requires specific software to access. What many people do not know is actually most of data on the internet is not stored in popular search engines like Google but in sections of the dark web. People have used the data from the dark web for the anonymity, particularly websites that are concerned with human rights and freedom of information.
Silk Road was an online trading site that used Bitcoin as a form of currency. After a story on Gawker broke out, the volume of transactions increased, and with it so did the value of Bitcoin. It was estimated that more than $1.9 billion of goods had anonymously been traded with the value of Bitcoin growing from lows of $20 in 2011 to highs of $1,000 at the end of 2013.
● MtGox Bitcoin exchange. In 2010, an American entrepreneur named Jed McCaleb established a market for connecting Bitcoin buyers and sellers. Users started exchanging Bitcoins for hundreds of dollars prompting McCaleb to sell the site to Karpeles, who developed MtGox into the largest marketplace for Bitcoins by 2014.
The exchange grew Bitcoin’s popularity and led to the price surge, though for a while… Further in 2014 MtGox was hacked, losing over $400 million of the users’ funds.
● Scaling of blockchain. In simple terms, blockchain is the central ledger where all cryptocurrency transactions are stored. It is what makes Bitcoin stable, secure and eliminates the chances of double spending.
When it was announced in July 2017 that the consensus on enlarging the capacity of blockchain had been reached, the price of Bitcoin increased. There was the biggest daily increase of 25.4%.
Speculators and Influencers
● The Magic Internet Money. An ad on Reddit called “Magic Internet Money” drove the internet crazy with a simplistic Microsoft Word Bitcoin concept. The ad which was framed as a meme helped to popularize Bitcoin as a magic currency driving demand from both the Reddit community and social media.
● Price Forecasts. In 2017 John McAfee, founder of the eponymous free antivirus program gave a very bold prediction. He was cited saying that Bitcoin would hit the $500,000 mark within three years. Long-term investors may want to play the long game, hold on to their Bitcoins, creating scarcity and driving prices upwards.
Igbal Gandham, a managing director at eToro (a trading platform) also has high hopes for Bitcoin. He points out a single coin needs to hit the $1,000,000 mark on its way to a leading legitimate currency of the world.
Technology development
● The SegWit upgrade. Bitcoin users’ top priority has always been a safe and secure platform. SegWit stands for Segregated Witness. It is meant to scale Bitcoin transactions, making the whole operation faster and more efficient.
The upgrade was implemented on version 0.16.0 of Bitcoin Core and took place in February 2018. A faster and more efficient Bitcoin system opens doors to scaling on a larger front - allows bigger corporate entities to enter the market, reduces fees, drives investor confidence and helps the price to surge.
● Rise of Bitcoin ATMs. Bitcoin ATMs allow users to exchange cash for Bitcoins and vice versa. Most Bitcoin ATMs just require a Bitcoin wallet address and cash to purchase and sell Bitcoin through the ATM. ATMs foster convenience making it easy to obtain Bitcoin and other cryptocurrencies. According to Statista, there are over 2662 ATMs as of April 2018 with most of them located in the US and Canada.
This is just a short journey into the history of Bitcoin, its rollout, evolution and conquered summits. What exactly is there for Bitcoin in the long term? Probably, nobody can give you an accurate answer, but what is clear now - there will be more ups and downs. And it becomes even more interesting to watch Bitcoin along the way.