Welcome to this Crypto Classroom episode Crypto 101: Evolution of Bitcoin. Today we’ll be talking about the evolution of Bitcoin and how it’s grown from a little known computer science project back in 2009 to the best performing asset class of 2020 so far.
The recoil from the 2008 Financial Crisis led people to start doubting the fiat monetary system, as speculation grew towards its trustworthiness. This climate was the spark that lit the fuse for Bitcoin by its creator, Satoshi Nakamoto, who made a peer-to-peer system allowing users to trade freely without having to go through the traditional financial system.
The concept revolutionized the payment landscape entirely. After the creation of the first block on Bitcoin’s blockchain, the first ever Bitcoin transaction, occurring in January of 2009. Since then, the evolution of Bitcoin has been perpetual and becoming more and more mainstream.
The transaction carried a hidden message in its code that read “The Times 03/jan/2009 Chancellor on brink of second bailout for banks”. This message resonates with true Bitcoin believers as it’s indicative of the financial crisis and the ultimate purpose for Bitcoin’s creation.
In 2010, the first ever exchange rate between Bitcoin and the dollar was set for 1 dollar to 2300.03 BTC. A year later, 10,000 bitcoins were worth roughly 25 dollars which would its use was for the purchase of two pizzas, marking the first ever transaction of Bitcoin and physical goods.
In November of 2012, the currency had its first ever halving. Bitcoin halvings occur approximately every four years or after mining every 210,000 blocks. The halving results in a 50% reduction in rewards given to Bitcoin miners processing transactions.
In 2013, Bitcoin had a 700% bull run hitting an all time high of 266 USD after only being 13 USD the previous year.
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In early 2014, Mt. Gox, a Tokyo-based Bitcoin exchange faced security challenges due to the lack of infrastructure in the industry. At the time this Shibuya exchange was handling 70% of all Bitcoin transactions worldwide. Overnight, the exchange made an announcement that 850,000 of their customers Bitcoins were missing and likely stolen.
This ultimately led to the demise of at the time, the largest crypto exchange in the world. However, the currency has since been evolving and began drawing the attention of companies like Microsoft and other household names signalling movement in a more secure and trustworthy direction.
As Bitcoin saw more mainstream adoption, this allowed opening up a market for derivatives like Bitcoin futures and options. Companies like Bitmex are pioneers for derivatives, futures, and options. Many traders believe that this is “where we make money” and see the futures, derivatives, and spot trading being the main driving force behind Bitcoin for the foreseeable future.
Competition is now getting fierce with many admirable companies entering the space. As Bitcoin evolves, its financial tools are starting to parallel the traditional financial markets. Whether this is a good or bad thing has yet to be seen.
In 2016, Bitcoin was reaching its second halving event, two months later it would hit the $5,000 marker.
However, the price of Bitcoin continued to fluctuate due to speculation and increased regulation. In 2017, Bitcoin underwent a hard fork where a change in the software had to occur.
The results from this led to the creation of Bitcoin Cash and was also the year in which Bitcoin hit its current all time high of 20,000 dollars towards the end of 2017.
After dropping to as low as $3,100 in 2018, Bitcoin went through a second bull run in the summer of 2019 reaching heights of $14,000. Ever since 2017, cryptocurrency ATMs have been growing exponentially, this serves as a benchmark for mass adoption. Merchant growth and consumer attitude towards the currency has also been on the rise ever since.
This past May, Bitcoin went through a third halving. Even with the volatility over the years, Bitcoin is still managing to remain the de facto standard for cryptocurrencies: providing people with a new method of transaction outside of the government (especially countries struggling with hyper-inflation), a way to have full ownership of their money, financial freedom, and a new asset class to invest in.
It’s worth noting that there are over 1.7 billion people in the world that are unbanked or underbanked. Most of these 1.7 billion people have access to smartphones.
In addition, with companies like Starlink whose mission is to provide global internet coverage. These people will have access to Bitcoin and Cryptocurrencies, which ultimately provides them with a degree of financial freedom that was previously inaccessible to them.
Return of The King: Bitcoin Price Blows Past $20,000
After three years of restoring confidence in the market, the boring days of Bitcoin trading are over. In mid-December 2020, Bitcoin surged past $20,000 to reach fresh all-time highs after testing investor patience for three weeks, with a year-to-date return of over 185%!
Beyond the price recovery, the Bitcoin rally in 2020 represents the rebuilding of market confidence and investors’ faith, mainly driven by the phenomenon of more institutional investors buying into the cryptocurrency.
The corporate investments in Bitcoin from the likes of Square, Microstrategy, PayPal, and MassMutual, have caught the attention of the investing world. Investors of all types are looking at Bitcoin as a gold alternative and a hedge against inflation.
Like all asset classes, the crypto market will rise and fall over time, and it can move in either direction much faster than equity markets, as we witnessed in Bitcoin bull run 2017. But for those who believe in the potential of crypto, Bitcoin’s institutional-led rally in 2020 begins a new phase in Bitcoin’s history.
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