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Rising and collapsing
Bitcoin was invented by the mysterious Satoshi Nakamoto in 2008, but the first real transaction took place just two years later, in 2010, when a Florida bitcoin miner paid for his pizza with 10,000 bitcoins, now equivalent to more than 50 billion dollars. florins. . Of course, no one could have known at the time that bitcoin with a value of less than $ 0.1 would be worth more than $ 19,000 a day.
We had to wait a few more years for the true tipping point, but then all hell broke loose. It is best to compare it with the gold rush that we saw with bitcoin, for example, one of our acquaintances established a cryptocurrency farm, for which he acquired high-performance computers from Asia to mine bitcoins and other cryptographic devices. In fact, everyone was talking about bitcoin in 2017, there were Teslas food consumers who lured each other on Facebook with the idea of what would be the virtual free mining of bitcoin with computers placed in Tesla charged with free electricity (since one of the largest cost factors in mining is electricity consumption). ).
So they were really all turning into bitcoin in 2017, which was also reflected in the exchange rate of the crypto device, as it started that year at another $ 966 and then rallied to 1935.2 percent to the previous all-time high of $ 19,666 ( December 17). so it has risen to more than twenty times, partly due to the fact that of course the higher than higher target prices for the instrument also come from professional investors.
However, it was a painful end to the rally at the time, which, from the perspective of so many years, arguably was one of the largest balloons in history. The price of bitcoin went from an all-time high on December 17 to a case of 65 percent after a sudden collapse through February 2018, followed by a slight downward trend with minor bounces, finally reaching a near-day local low. a day (mid-December 2018) than a year earlier than the previous historical peak.
The bitcoin exchange rate crash in 2017 was fueled by a series of austerity measures announced by the world’s central banks to create a more regulated market, and the U.S. Securities and Exchange Commission (SEC) sent dozens of subpoenas and requests for information to companies in the cryptocurrency market, and Of course, scandals also multiplied enormously, leading to the closure of several cryptocurrencies and the much stricter regulation of ICOs (IPOs in cryptocurrencies).
Renaissance
The year 2019 was again successful only for bitcoin, as the exchange rate of the crypto device rallied by almost 94 percent, and then in 2020, in the wave of panic in the stock market triggered by the coronavirus epidemic, bitcoin also participated in the fall, from the local peak in mid-February. the exchange rate fell more than 63.3 percent, after which he rolled the dice and began a massive rise. Essentially, it was only in early September, with a general deterioration in market sentiment, that a major correction (almost 15 percent) was achieved for bitcoin, but the exchange rate managed to do so in less than 2 months, and the Rise accelerated dramatically in October, which led in the bitcoin rate hitting a new all-time high of $ 19,918.
But still, what is the story in 2020 that has caused the exchange rate of the previously lost crypto device to reach an unprecedented height?
Probably the main reason behind this year’s rally in the exchange rate of bitcoin is the abundant amount of liquidity provided to jump-start the economy, which the world’s governments and central banks are putting into the economy in the form of fiscal and monetary incentives. . Due to crazy money printing, there is so much liquidity in the system that it goes everywhere and causes market bumps in some places, this is what we have seen with bitcoin as well. Also related to this is that as much money as possible can be printed, but bitcoin stocks are finite, with only 21 million pieces in circulation, and 90 percent of that amount has already been “mined.” Another major advantage of bitcoin is that it cannot be manipulated like traditional money, and an important factor is that, like gold, many see it as a means of escape.
Recently, we have also seen that the world’s central banks are also increasingly open to digital money, the Chinese central bank is already testing the digital yuan, but the ECB has also been prompting the introduction of its own digital currency. In July, the bank supervision branch of the US Department of the Treasury, the OCC, also granted licenses to domestic banks to provide custody services to cryptocurrency companies, essentially allowing domestic banks to hold digital assets for their assets. customers.
Meanwhile, more and more institutional investors are also gaining exposure to the crypto arrangement. Paul Tudor Jones, one of Wall Street’s most recognizable hedge fund managers, revealed in a May message that one of his funds has a low single-digit percentage of bitcoin futures in its portfolio. So now we see that both institutional and accredited investors are moving into the bitcoin space, which means a higher level of market maturity and financial awareness, which was completely lacking in the cryptocurrency sector in 2017, as essentially all of the increase was based on speculation by small investors.
A major milestone this year was also when PayPal announced in October that it would enter the cryptocurrency business and launch a service to buy, hold, and deliver cryptocurrencies, making PayPal the largest financial company to vote for trust in virtual. coins.
Where else from here?
In the last few months, it seems that the same bitcoin is starting to emerge as in 2017, with investors small and large turning on this now and making a great story. However, many say that this year’s rally is different from 2017, mainly due to the involvement of institutional investors, but it also appears that central banks and the world’s major financial corporations are also increasingly seeing the imagination in the market. digital money.
As in 2017, there were, of course, particularly optimistic predictions about how long the price of bitcoin might rise, essentially a bid for each won so far by Catherine Wood, CEO of ARK Investment, who, citing the participation of institutional investors. , predicts that bitcoin can reach half a million dollars (does not specify exactly when it will happen). Galaxy Chief Digital Officer Mike Novogratz made a shorter-term forecast in November, when he said bitcoin could hit $ 55-60,000 by the end of the year (although he had previously predicted that by the end of 2018 it could “easily get there “at $ 40,000). thousands of dollars at the exchange rate of the cryptocurrency).
In short, regardless of whether we see similarities between the bitcoin rallies of 2017 and 2020, it is safe to say that the increase observed this year is in much more stable, more mature, and therefore more sustainable stages in the long term.
Cover image: Dan Kitwood / Getty Images
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