From entertainment for geeks, the first cryptocurrency moved into the class of real assets, now banks, investment funds and insurance companies work with it. How the “financial bubble” became one of the most promising instruments – in topplabs.org
On December 17, the Bitcoin exchange rate on the Binance crypto exchange updated its all-time high at around $ 23.8 thousand.This happened exactly three years after the price of the coin first approached the level of $ 20 thousand and set a record that has been held since December 2017.
Three years ago, the rally in bitcoin and other digital coins called altcoins was driven by the interest of retail investors who massively invested in a new type of assets in order to make money on their growth. A sharp market crash in early 2018 led to a large number of losses and a controversial reputation for cryptocurrencies. In 2020, the situation is going according to a different scenario.
1,309 BTC for $ 1 and two pizzas for $ 238 million
Bitcoin's birthday is considered to be October 31, 2008, when an anonymous developer or group of programmers named Satoshi Nakamoto published a document titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. It was this day that was designated the moment of birth of the blockchain industry, although the cryptocurrency itself appeared only at the beginning of 2009 – when the first block in the bitcoin blockchain was mined.
On January 3, 2009, a genesis block was mined, which contains the date and a short excerpt from The Times magazine article: “The Times 03 / Jan / 2009 Chancellor on brink of second bailout for banks”. Bitcoin began to be perceived as an alternative to the traditional financial system and the banking sector. The first transaction between Nakamoto and developer Hal Finney took place in January, and Bitcoin first appeared on the exchange in October. The New Liberty Standart platform offered 1309 coins for $ 1 (now their price is $ 31.2 million).
The first payment with bitcoins took place in 2010. On May 22, Laszlo Hanes bought two pizzas for 10,000 BTC. This day is now called Bitcoin Pizza Day and is celebrated by crypto enthusiasts around the world. To date, the cost of Hanes' lunch has reached $ 238 million.
On February 9, 2011, the value of bitcoin reached the $ 1 mark for the first time. For six months, the coin has risen in price more than 30 times – on June 8 on the Japanese stock exchange Mt.Gox, the rate was fixed at $ 31.91. On June 19, the exchange was hacked by hackers, as a result 60 thousand users were affected. One of the criminals opened the site's administration account and sent out thousands of counterfeit bitcoins. As a result, the cryptocurrency rate fell from $ 17.5 to $ 0.01. After that, it recovered for more than a year and a half, returning to the $ 31 mark only by February 2013. By November of the same year, the price of the cryptocurrency had increased almost 30 times and exceeded $ 1000.
In 2016, the Japanese authorities recognized bitcoin and other digital money as a means of payment. And at once several large services, such as Uber and Steam, began to accept cryptocurrencies for payment. However, for the first time, they became truly widespread in 2017.
How the financial bubble burst
On January 5, 2017, Bitcoin traded at $ 1150, after which it began to rise sharply. This happened against the backdrop of the growing popularity of a new method of attracting funding – ICO. Initial token offerings have attracted millions of dollars, often without even a minimally viable product. Despite the low success rate of such startups (more than 70% of them failed), they attracted a lot of public attention due to the possibility of quick and easy capital growth, in the event of a multiple increase in the value of the token after its release.
In early September, bitcoin traded at $ 5 thousand, and on December 6, its value reached $ 12 thousand. In the next few days, it continued to grow strongly and on December 17, 2017, at its peak, approached the $ 20 thousand mark. The next day after that, the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (Cboe) added bitcoin futures, and the value of the cryptocurrency began to decline sharply.
Later, Christopher Giancarlo, then head of the US Commodity Futures Trading Commission (CFTC), said that the country's government intended to authorize the launch of futures in order to "burst the bitcoin bubble." With the launch of futures on a regulated market, it became possible to go short.
The former head of the CFTC stressed that in 2017, US regulators corrected their mistake in 2008, when they did not react properly and did not "burst the mortgage bubble while there was such a possibility."
By December 22, 2017, the bitcoin rate fell below $ 11 thousand, and on February 6, 2018, it dropped to a local minimum of $ 6 thousand. In 1.5 months, the cryptocurrency lost 70% of its value and entered the stage of a protracted correction. On December 15, 2018, the asset price dropped to $ 3.2 thousand, and the market sentiment was negative. Many investors bought bitcoin at a significantly higher price and sold to lock in losses.
For example, the CEO of SoftBank, billionaire Masayoshi Son, talked about how he lost $ 50 million in Bitcoin trading. According to Son, on the advice of a friend, he invested 1% of his personal assets, about $ 200 million, in the first cryptocurrency.But this began to distract his attention from the main business, and after a while the businessman sold digital assets with a loss of $ 50 million.
WSJ wrote, citing sources that the SoftBank founder bought the cryptocurrency at the peak of the market in December 2017, after which the bitcoin rate fell sharply, and the billionaire sold it, losing $ 130 million.Sources claimed that Son invested in digital money on the recommendation of billionaire Peter Brieger …
Market recovery and highs renewal
In 2019, in addition to the recovery of bitcoin quotes from $ 3.5 thousand to $ 7 thousand and a peak of $ 14 thousand, several events took place, thanks to which the industry made a leap in development. The U.S.-China trade war and the Fed's rate cut have helped digital money gain ground. For the first time, investors and analysts began to seriously compare them with defensive assets, including gold.
In the summer of 2019, the growth of the bitcoin rate accelerated amid Facebook's announcement of the launch of its own cryptocurrency Libra. But this initiative was immediately opposed by financial regulators around the world, so the company had to revise its plans and switch to a model with the release of stablecoins pegged to the exchange rate of national currencies. The release should take place in January 2021.
At the beginning of 2020, bitcoin again began to demonstrate the properties of a defensive asset. It has strengthened amid the risks of the coronavirus pandemic, the US-China trade war and the US armed conflict with Iran. On February 13, the value of the cryptocurrency reached a local peak of $ 10.5 thousand, but then began to fall sharply against the background of a general decline in financial markets.
On March 12-13, the cryptocurrency experienced one of the largest crashes in its entire history – its price dropped by more than 50%, from $ 7.9 thousand to $ 3.8 thousand.But quotes began to recover quickly and returned to the level of $ 10 thousand already May 7. After that, the cryptocurrency was trading in the range of $ 10-12.5 thousand, and the final stage of active growth began in the fall. Over the past three months, bitcoin has risen in price by almost 130% and updated its all-time high at around $ 23.8 thousand.
The main reasons for the rise in the price of bitcoin in 2020
In the context of the pandemic, the US authorities directed $ 3 trillion to support the economy; in early December, the Ministry of Finance proposed to allocate another $ 916 billion to stimulate the economy. and investors began to look for new ways to preserve assets.
Market participants began to oppose bitcoin to the US dollar, since it has a deflationary structure, and its number of coins is mathematically limited to 21 million. At the same time, the emission of the American currency can occur on an unlimited scale, which leads to its depreciation.
In 2020, investment by institutional level players in cryptocurrency has become a trend. It all started with MicroStrategy. In August, September and December, she invested $ 475 million in reserve assets in the first cryptocurrency (now their price has exceeded $ 923 million). In December, she announced plans to raise another $ 400 million for the same purposes.
Investments in the first cryptocurrency were also reported by Square, the company of Twitter creator Jack Dorsey, the American insurance company MassMutual with an investment fund of over $ 235 million and Ruffer Investment Company, which in November became the owner of bitcoins in the amount of over $ 740 million.
On December 3, it became known that the S&P Dow Jones Indices company, which is behind the leading US stock indices – the S&P 500 and the Dow Jones, will present an index for cryptocurrencies in 2021. The product is being developed in collaboration with New York-based Lukka.
The reason for the launch of the index for cryptocurrencies in the company was the growth of interest in them from investors. Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indices, said the index will simplify the digital asset management process and protect investors from speculative risks inherent in the market.
S&P Dow Jones is not the first company to launch a cryptocurrency index. In 2019, a similar product was presented by the world's second largest stock exchange – Nasdaq. She added an index based on 100 cryptoassets called CIX100.
The Chicago Board Options Exchange (Cboe) also announced the launch of an index for cryptocurrencies in 2021. The tool will show the dynamics of the price of digital assets and historical data. Another Chicago-based exchange, CME, announced the addition of Ethereum futures on February 8, 2021.
The beginning of a big trend
Scott Minerd, investment director of Guggenheim Investments, stressed that the first cryptocurrency at a price of about $ 20,000 remains "extremely undervalued", while its rate has the prospect of growth to $ 400,000. Such bold forecasts for cryptocurrency are not uncommon. For example, in November, in a report for institutional clients, the managing director of Citibank wrote that by December 2021, bitcoin could rise in price to $ 318 thousand. He explained this forecast by a technical analysis of the previous highs and lows of the BTC price.
In the short term, the nearest target for bitcoin is at around $ 25 thousand, for Ethereum – at $ 750, leading analyst at 8848 Invest Viktor Pershikov said in a comment to topplabs.org. He called the current situation in the crypto market a Christmas rally, which is usually characteristic of the stock market, but a similar dynamic is observed in digital assets.
“It is likely that growth will continue until mid-January, when new US President Joe Biden takes office. A new package of assistance to the American economy is expected from him, and, as a consequence, new liquidity, which will appear on the market. If the aid package is not accepted, or it is too small, the cryptocurrency will go into a protracted correction with a target of $ 16,000. Thus, I expect continued growth in prices for bitcoin and other cryptocurrencies in the coming month, "Pershikov predicted.
The head of the data analysis department of CEX.IO Broker Yuri Mazur agreed with him. According to the expert, in the medium and long term, the cryptocurrency is heading towards the $ 25 thousand mark.
“We are returning a positive outlook for all cryptocurrencies, as from a technical point of view, the bullish trend is likely to continue next year, so corrective movements in digital assets should be used to consolidate long positions,” Mazur emphasized.
EXMO Business Development and Communications Director Maria Stankevich added that now the market is exclusively in an upward trend. Soon, a slight correction may occur and an upward movement again.
“To buy or not to buy bitcoin in a portfolio depends, in fact, on the structure of the portfolio itself and the goals of the investor. For those who position themselves as an investor rather than a trader, we would recommend waiting for a small correction and buying at this stage, ”the specialist advised.
Private trader Alexander Boyarintsev also looks positively on the prospects for bitcoin. He called the breaking of the $ 20,000 mark as the main signal for the beginning of a big trend and for the next year.
“I am more and more inclined to believe that $ 50 thousand in 2021 is quite realistic. A very important fact: not one or two large institutional investors buy Bitcoin as protection for hundreds of millions of dollars. Therefore, definitely take and hold for the whole next year, ”the trader recommended.
In 2020, the bitcoin rate has risen by 526% in 10 months. The first cryptocurrency became more widespread, became recognized by the leading players of the institutional level, and experts are confident that in the near future it has prospects not only for further growth in quotes, but also for development as a financial instrument.