Bitcoin is the first-ever cryptocurrency. For years, it was also the cryptographic currency known to people that could not name any other. For some time investing in Bitcoin was considered a golden deal, but the powerful player was quickly knocked off the pedestal. What was the growth of Bitcoin, and why did it fall?
The history of Bitcoin
Bitcoin was created in 2008 by an inventor named Satoshi Nakamoto, who never revealed his true identity. The first Bitcoin exchange rate at mining costs was US$1 for 1309 BTC – people who spent ten dollars on Bitcoin in 2009 became millionaires a few years later. In the beginning, however, there was no indication that Nakamoto project will be a great success.
Bitcoins price came to one dollar in 2011, and this year, too, the first speculative bubble came to almost forty dollars. The bubble burst, and investors turned their backs on Bitcoin, causing several large stock exchanges to collapse.
Slowly, however, capitalization of cryptocurrencies grew. By mid-2013, it was already one billion US dollars and was still growing. There have been other speculative bubbles, until, in December 2017, Bitcoin reached its historical rate – over US$20 000 per unit. Like the previous bubbles, this one also burst, putting not only Bitcoin but the whole crypto market in a state of almost constant decline.
What happened to Bitcoin?
The history of Bitcoin is a classic example of a speculative bubble. Bitcoin was never created to prevent this from happening. Unlike many assets which are regulated by external factors different from the capitalization generated by investors, the price of Bitcoin was dictated almost exclusively by business demand. Since there was a cryptocurrency boom on and everyone wanted their pack of Bitcoins, a difficult to control bubble was created.
Also, when the first investors started selling out the overpriced units, it was convenient to lower the cost to repurchase Bitcoin at lower prices. The bubble, grew uncontrollably, begun to affect the entire cryptocurrency market and, as a result, dragged down more than just the course of Bitcoin itself.
It is difficult to determine what future awaits this cryptocurrency. It has led to a massive bubble at least four times throughout its history, but none of it has had as much impact as the one of December 2017.
It is furthermore complicated by the creation of a new Bitcoin branch – Bitcoin Cash, with larger blocks and a more customer-friendly retail structure. Analysts predict that Bitcoin supporters may soon switch completely to Bitcoin Cash, leaving the older version like a sinking ship. However, at this point in time, the price of Bitcoin Cash, like Bitcoin, is still dropping slowly. With such a large speculative bubble, it isn’t easy to expect a substantial rebound over the next year or two. Perhaps in a few years, consolidation will take place, and another equally powerful bubble will be created. For the time being, though, only the toughest investors want to continue dealing with Bitcoin.