What is the Bitcoin Hype all about? by FYN
If you are someone with an Internet connection and you like to keep yourself well informed on global trending topics, then odds are that you’ve heard of Bitcoin. From Government Agencies to Financial Experts and even Entrepreneurs and Investors, everyone seems to be talking about Bitcoin. And why would they? This virtual currency has caused quite a stir with its meteoric rise in value that has seen it attain an exchange price of $19,000 as at the time of writing this article (December 17, 2017).
This stunning climb in the price of Bitcoin has led to a frenzy with people on both sides of the aisle having strong opinions on the cryptocurrency. There are some who say it is the future of money while there are others who firmly believe it to be a bubble, not unlike the ‘dot com’ bubble of the late ’90s and early 2000s.
Amidst the conjectures, fantastic projections, and prophecies of doom, a lot of the core issues surrounding Bitcoin might seem lost. While there is a lot of talk about Bitcoin and the cryptocurrency space in general, there still exists some great degree of misconception about key issues in the market. It is, therefore, necessary to shed light on some of the more obscure but important areas of the Bitcoin revolution so that they no longer become a mystery to the average person.
A Little Bit of History
Bitcoin was launched in 2009 based on the 2008 white paper released by the anonymous Satoshi Nakamoto. This white paper introduced the Bitcoin protocol as a Peer-to-Peer payment system that made use of a distributed ledger via a Blockchain.
Upon release, it was a revelation of sorts for virtual currency enthusiasts as it solved the double-spending problem which had foiled many attempts at implementing viable virtual currency platforms. It was also the first successful implementation of the Distributed Ledger Technology (DLT) framework which many believed was the future of distributed computing and the realization of a more decentralized global system.
While Bitcoin was making waves within the digital world, it has little or no impact as yet upon the global landscape. The world was still coming to terms with the global financial crisis that erupted the previous year and many were still counting their losses.
The blockchain which is the core technology of the Bitcoin protocol began to attract a lot of interest from many business segments. Soon, the blockchain was being seen as a disruptor technology and one of the more important emerging technologies of the 21st-century. In the years that followed, many Bitcoin derivatives were released and the world of cryptocurrencies has continued to expand.
Analysing the Bitcoin Hype
To do justice to an analysis of the Bitcoin hype requires a multifaceted approach to all the situations, circumstances, prevailing market factors as well as sundry reasons that have contributed to the rise in the profile of Bitcoin over the years. There isn’t one singular explanation as to why Bitcoin has been able to experience an increase in the region of an entire degree of magnitude in less than a year. Rather, a number of factors that aggregated together to cause this phenomenon.
The 2008 Global Financial Crisis
The impact of the 2008 financial meltdown was far-reaching, with many people losing all their life’s savings and investments. Conversely, the major players in the Bank, Investment Firms, and other Financial Organizations all seemed to have profited greatly from the debacle. This led to an overwhelming loss of investor confidence in mainstream financial markets.
With investors looking to diversify their portfolios, Bitcoin seemed like an interesting proposition especially when its price began to rise. This rise in value coupled with the fact that the market isn’t controlled or regulated by Government/Financial Regulators attracted a lot more investors to participate in cryptocurrency trading.
The 2008 global financial crisis was a tipping point for many people. It led people to actively begin to look for ways to safeguard their financial prosperity from the mainstream markets. With Bitcoin coming on the heels of such a profound event, promising a much more secure market, many were drawn to it and began to invest.
The Social Media Factor
When Bitcoin began to make an impression on the global discourse, some were quick to dismiss it nothing but a passing fad. However, with the power of social media and aggressive person to person interaction, Bitcoin started becoming a hot topic of conversation on social platforms. Every story connected with the cryptocurrency became a trending story. By so doing, Bitcoin has risen from an obscure virtual currency to something that is now ubiquitous on the Internet.
Some retailers and Online Casino operators soon began to accept Bitcoin payment and this became the first examples of mainstream use for the cryptocurrency. There are even online casino platforms that deal entirely only in cryptocurrencies due to the high level of anonymity.
In the early days of Bitcoin, users could mine for it using their laptops and desktops. Between the autumn of 2010 and the summer of 2011, the size of the network grew exponentially that it no longer became possible to mine Bitcoins using such hardware. Mining cartels began to emerge, establishing large mining facilities made of multiple hi-tech ASIC units.
Successfully mining Bitcoin gives the miner a reward of a certain number of Bitcoins which is halved every four years. The total Bitcoin supply is capped at 21 million, and after that, no more Bitcoins will be mined. This has led to a mining race that has created fierce competition in the mining process.
Proponents of Bitcoin will try to convince you that it is a true currency, i.e. it is both a medium of exchange and a store of value. However, the pattern that has emerged over time is that people tend to hold on their Bitcoins rather than spend it in the hopes that its value will go up even higher. This makes Bitcoin more of an investment currency than an exchange currency. More and more people holding on to an asset class in the hope that its price will go up leads to scarcity which invariably drives up prices. With every milestone price increase that Bitcoin experiences, investors are tempted to hold on it even longer.
By 2022, all available Bitcoins would have been mined and at that point, there isn’t the promise of more Bitcoins to keep investor hoarding afloat. For Bitcoin to truly become a serious alternative to fiat currency, it must become an exchange currency. More people have to use it as a medium of exchange in payment for products and services.
Whether Bitcoin is indeed a bubble remains to be seen but as of right now, there is no denying the fact that it is arguably the most valuable tradable commodity on the planet. The big debate is now what needs to happen to Bitcoin in terms of Government regulation for it to become a mainstream currency. The coming months and years will likely reveal the answer.