Finally, when the US housing market crashed in 2008 and pulled the world into a yearlong recession, cryptographers came out with something called cryptocurrency. The first of its kind was called Bitcoin (BTC).
Since then, cryptocurrencies have taken the world by storm, creating massive wealth opportunities and pushing new technology and investing paradigms. Consequently, some became insta-rich while others bankrupted, teaching the world the hard way of the cyclical nature of crypto prices.
Over the course of its existence, Bitcoin’s price rose sharply, but dropped equally quickly, in a cyclical fashion. Arguably, the biggest sell-off happened in late 2017 and early 2018, the period we now remember as the crypto winter.
A Brief History of BTC
The idea behind the creation of BTC in 2009 was that the newly minted currency should be an alternative to fiat currencies (a term used to denote money issued by governments, such as the US dollar). The entire system relied on a “new” technology called blockchain, where all transactions were recorded on a ledger that was shared by all participants in the network. This enabled unparalleled security as the ledger contained all identities anonymously through a wallet code, the balances of cryptocurrency as well as all the transactions executed on the network.
This ledger is distributed across all users, so a consensus mechanism is deployed to ensure security. BTC was designed with scarcity in mind, as only 21 million units of this currency will be created. Each transaction was validated by a proof-of-work (PoW) consensus mechanism, and added to the ledger with the help of so-called miners.
These are PCs whose computing power was lent to the network, to complete cryptographic hash puzzles. For their troubles, the miners get rewarded in Bitcoin. Allegedly, BTC was created by a mysterious figure called Satoshi Nakamoto, whose real identity is still unknown, though several people claim that they’re Satoshi.
Notably, the first real-world financial BTC transaction included a transfer of 10,000 BTC for two Papa John’s pizzas, a rough value of $25. This means that 1 BTC was valued at ¼ of a cent. After BTC exploded in price in the following years, the custom of celebrating pizza day among the Bitcoin community each May 22 became a tradition.
Is Bitcoin Still a Good Investment?
In 2011 Bitcoin crossed the $1 mark for the first time, with the $10,000 mark breached on November 2017 and then $20,000 in December 2017. After this momentous rise, the entire crypto market entered one of the numerous crypto winters, where prices nosedived and destroyed demand for crypto in general. Interest surrounding BTC and crypto, in general, rose again during the Covid-19 pandemic, when BTC passed its previous all-time high of $20,000 in December 2020, to eventually touch a new all-time high of $68,990 in November 2021.
However, the war in Ukraine pushed energy prices up and caused a massive spike in inflation in the western world. This prompted the central banks, more importantly, the Federal Reserve (Fed) in the US, to raise rates aggressively, leading to a sell-off in risk assets and cryptocurrencies in general. Furthermore, this new volatility caused the collapse of the algorithmic stablecoin Terra USD (UST), which further shook the crypto markets.
Despite all of the volatility in 2022 and a new crypto winter, Bitcoin remains one of the best-performing assets over the long term, but also it is one of the most volatile assets creating hurdles for new investors to jump in.
Who Owns the Most BTC?
Hodlers, a crypto term that indicates people holding the currency despite its volatility, and whales, another term indicating investors holding a large number of a particular asset, best describe terms thrown around in the crypto world. As of November 2022, a US-based software company MicroStrategy is the world’s biggest owner of BTC among the publicly traded corporations. The company owns 130,000 BTC, according to its third-quarter 2022 earnings report.
Other notable holders of BTC include Satoshi Nakamoto, who, according to anecdotal reports, owns 1 million BTC. Following Nakamoto is the crypto exchange Binance, whose wallet holds roughly 252,597 BTC, representing 1.3% of the circulating supply of BTC.
BTC Pros and Cons
There certainly are some advantages of owning BTC, as more businesses and business leaders are introducing or are planning on introducing cryptocurrency transaction options. It allows for easy-cross border payment options with the same transaction fees, regardless of whether it’s used locally or internationally. It has great liquidity and enjoys the biggest popularity in the crypto world, with a two-layer security process ensuring it remains secure.
On the other hand, BTC is considered inefficient because it entails a mutual agreement-based system that includes sharing and validating ledgers, which makes it slow for retail purposes. In addition, BTC and crypto, in general, are very volatile, and the lack of government regulation keeps crypto open to fraud and illegal transactions. Finally, the mining process by which new BTC are created is very energy inefficient; with the current sky-high energy prices, mining is becoming too expensive.
To Buy BTC or Another Cryptocurrency?
Cryptocurrencies are notoriously volatile, and there are over 20,000 different coins/tokens; however, BTC is the most popular. That said, BTC is the one that often starts rallies in crypto and is the canary in the coal mine for other cryptocurrencies. Holding BTC could be the safest bet for crypto in general, but investors need to understand the risk involved in holding BTC. The recent drop in price could make BTC a more appealing investment. All in all, new investors in crypto could opt for BTC as the safest bet.
The Future of Bitcoin
While it is difficult to predict almost anything with any certainty, some market analysts gladly share their views of BTC price and the possibility of it reaching stratospheric heights.
BTC price predictions: Bitnation
Predictions that could be the closest to something empirical are predictions based on machine algorithms that analyze technical indicators of charts over time, such as the relative strength index (RSI), moving averages (MA), and Bollinger bands (BB). An approach employing machine learning models often performs better than classic statistical methods with a 55% accuracy.
Potential investors and BTC enthusiasts need to remember that no price prediction is perfect, and no one has a crystal ball that allows them to see the future. When investing, price predictions must be combined with other financial advice, risk assessments, market conditions, sentiment, and general information.
Of course, the scarcity model built into BTC could push the price up as high as $1 million, a number thrown around various analysts’ circles, but only time will tell what lies in BTC and crypto’s future.