Why 2017 Can Be Considered the Year of Bitcoin

October 1, 2018

by Ccercle

Bitcoin is historically one of the most successful startups in the world. From basically having no value in 2009 to more than £11,600 in December 2017, the cryptocurrency continues to outperform other asset classes as well as debunking theories that Bitcoin’s bubble will soon burst.

Bitcoin’s feats in 2017

As the prices of Bitcoins soar to ground-breaking records, market data also shows that the biggest Bitcoin exchanges have been seeing varying prices among transactions. The differences can go as high as £1,460 in value among some of the largest exchanges. On Coinbase’s GDAX exchange, Bitcoin traded for over £13,100 on December 17, which is a significant mark up over the £11,350 price reported by Bitfinex.

Bitcoin’s achievements in 2017 are considered by many economists to be revolutionary. For one, Bitcoin outclassed every other asset in 2017, having a 60,000% price increase at the end of Q2 2017. In addition, thousands of BTC millionaires gave rise to what is officially called as Initial Coin Offerings (ICOs), and sent over £1.46 billion in capital to several new cryptocurrencies. Today, Bitcoin is responsible for over 50% of the total value of all cryptocurrency assets. In addition, the cryptocurrency market sees about £3.60 billion in trading volume for Bitcoin across 1,000 currencies.

With the aforementioned achievements, economists say that traditional investors should stop treating Bitcoin as a startup and see it as a legitimate asset class just like other regulated currencies.

A change in perception

Bitcoin is now seen as a worthwhile investment and this change in perception happened in 2017. Last year the media, governments, as well as traditional investors finally took the cryptocurrency seriously. JP Morgan Chase initially said that the cryptocurrency was a fraud, only to change its stance later in the year. Japan has officially recognised Bitcoin as a legitimate source of payment for goods and services.

The UK also acknowledged Bitcoin as a valuable financial asset when it decided to regulate the cryptocurrency in order to avoid money laundering and other scams associated to the cryptocurrency market. Despite challenges earlier this year from China, when it banned its citizens from making Bitcoin transactions, the aforementioned achievements of the cryptocurrency mean that there is now a strong investor sentiment that cryptocurrencies are here to stay.

International Monetary Fund official Christine Lagarde said that cryptocurrencies like Bitcoin could be adopted by countries with unstable monetary systems, in what she calls the “Dollarisation 2.0.” She argued that citizens might one day prefer virtual currencies: “why might citizens hold virtual currencies rather than physical dollar, euros, or sterling? Because it may one day be easier and safer than obtaining paper bills, especially in remote regions. Virtual currencies could actually become more stable.”

Lagarde’s idea is currently being developed in Venezuela. President Nicolas Maduro announced a new cryptocurrency called Petro that can be used for trading goods and services within the country. Maduro said that the cryptocurrency would be backed by commodity reserves like oil and diamonds, similar to how currencies used to be pegged against a commodity like gold. According to the Venezuelan President, the Petro will help Venezuela overcome the country’s financial “blockade.”

“Venezuela will create a cryptocurrency to advance monetary sovereignty, as it will help to overcome the financial blockade and thus move towards new forms of international financing for the economic and social development of the country,” said Maduro.

The currency of the future

Bitcoin provides startups easier access to funds. Fledgling companies that offer ICOs proved this fact when capital backed by ICOs soared to billions in 2017. Most startups find it difficult to ask for funding from Silicon Valley and other major corporations, but ICOs changed how funding works in 2017.

Some economists also see Bitcoin as the new hedge against a failing economy. Gold has always been the commodity of choice among investors who are hoping to weather an economic slump. However, Bitcoin’s popularity and price movements this year have convinced some investors that the cryptocurrency could be treated like gold. For one, its prices rise amid failing currencies. In addition, Bitcoin can now be traded in many countries even if the cryptocurrency is unregulated. Both of the aforementioned characteristics of Bitcoin are similar to gold, and the only idea that’s holding traditional investors from acknowledging the cryptocurrency as a safe haven is the fact that it’s not a physical asset. Bitcoins have no real intrinsic value given the nature of their form, in contrast to gold which can be used for many other things apart from trade. When Bitcoins collapse, their value is lost forever.

As an asset, Bitcoin is an asset class unlike any other. Just like other startups that went public in the last decade, the cryptocurrency is still fairly young. There are a lot of economic events that can potentially decline its prices or even put an end to the cryptocurrency market. However, the achievements of Bitcoin and its continuously rising popularity are pointing to the fact that the world is entering a new era of investment and trade.