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Bitcoin: Once A Diamond In The Rough, Now A Treasure

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By mid-February 2021, Bitcoin hit an all-time high of over $53,000 — To understand where cryptocurrency is today and where it’s headed, an overview of its tumultuous history is in order

The Meteoric — And Bumpy — Rise Of Cryptocurrency

  • The Rises & Falls Of Bitcoin
    • 2009: The Birth Of Bitcoin
      • The first successful cryptocurrency to launch to the public 
      • Mining began, but the coin’s value could not be determined
    • 2010: First Purchase Using Cryptocurrency
      • Paid 10,000 BTC for 2 pizzas
      • Assigned monetary value to Bitcoin
    • 2011: Namecoin, the first successful alt coin is launched
    • 2013: The First Crash
      • Bitcoin reached $1,000 then crashed to $300
      • It would take 3 years for Bitcoin to recover its value
    • 2013-2017: Gradual Growth
      • Driven by growing number of establishments accepting Bitcoin
      • Banks and fintech institutions investing in crypto and blockchain
    • 2016: Ethereum emerges on the market with an Initial Coin Offering (ICO)
    • 2017: Meteoric Rise
      • Bitcoin price jumped from under $1,000 to more than $19,000
      • U.S. accused two cryptocurrencies of manipulating Bitcoin’s value
    • 2018: The Second Crash
      • Bitcoin fell by 70% over the course of a year
      • Market value of all cryptocurrencies falls to $130 billion
      • Driven by a series of legal troubles, including
        • Coincheck hack lost $530 million in stolen cryptocurrency
        • SEC prosecution of ICOs as unregistered securities
        • Investigations of criminal manipulation of coin prices
    • 2019: Outperforming Stocks
      • Bitcoin prices more than doubled — compared to 31% return on best performing stocks
      • New cryptocurrency funds and futures attracted investors as the global economy slowed

In 2020, Bitcoin nearly quadrupled in value, and became the center of conversations among big investors

2020: Resurgence Of Cryptocurrency

  • The Bitcoin Halving
    • Every 4 years, the reward given to Bitcoin miners for processing transactions is cut in half
      • This reduction in supply drives up prices based on scarcity
      • The most recent halving occurred in May 2020 — as pandemic lockdown brought the economy to a standstill
    • More than 20% of all dollars in circulation were printed in 2020
      • BUT, the supply of crypto coins is finite, believed to lower inflation risk
      • Investment in crypto is widely used as a hedge against U.S. inflation
  • Accessibility Spurs New Investments
    • DeFi grew from $1 billion to $14 billion in “locked” assets — increasing the value of tokens associated with the decentralized finance platform
    • Adoption of central bank digital currencies by governments around the globe — Many fearing China’s aggressive moves will leave them behind
    • Office of the Comptroller of the Currency gave banks permission to hold crypto on behalf of customers — indicating mainstream acceptance
    • Proof of Stake blockchains became more prominent — Represent just 15% of the crypto market but responsible for driving significant growth
      • Proof of stake blockchains incentivizing users to “lock” their coins into the network — ensuring long term operability

In January 2021, Bitcoin reached new high of nearly $42,000, before it (along with other coins) fell by 12% overnight — wiping out $200 billion from the cryptocurrency market

In February, bitcoin hit a new record of $53,000

  • Tesla purchased $1.5 billion in bitcoin
    • Announced plants to accept bitcoin payments
    • CEO Elon Musk called crypto “less dumb” than cash
  • Apple Pay began accepting BitPay — a prepaid bitcoin MasterCard
    • Bitcoin can now be used anywhere MasterCard is accepted
  • Elon Musk is also partially credited for the growth of Dogecoin which has risen over 900% since the start of 2021

What To Expect With Bitcoin In 2021

  • Increased investing from traditional finance leaders
  • Emergence of new use cases
  • Rapid adoption of crypto cards
  • Proof of Stake will drive most of the activity outside bitcoin
  • Investors view cryptocurrency as a portfolio optimizer
  • The U.S. dollar is expected to continue to weaken in 2021 — driving more investment in cryptocurrencies

With cryptocurrencies tearing through records, investors should keep in mind the cost of mining coins

The Cost Of Mining & Maintaining Crypto

  • In 2017, estimated power required to run cryptocurrency
    • More than all the power used by the Republic of Ireland
    • On track to exceed the power needs of Hungary and New Zealand
  • In 2018, mining accounted for 1% of the world’s energy consumption
  • In 2020, Bitcoin consumed 120 gigawatts per second
    • 156 million horses
    • 49,440 wind turbines
  • It takes 10 minutes and 72,000 GW (or 72 Terawatts) to mine one Bitcoin

As the popularity of cryptocurrency continues to grow, the potential for wild success is attracting investors willing to take on big risks

Crypto’s the future of currency — don’t get left behind!