Money & Banking

Bitcoin’s 9000,000% rise this decade leaves skeptics aghast

Bloomberg December 31 | Updated on December 31, 2019

If in the throes of this bull market’s earliest stages of recovery someone told you to forgo stocks, forget commodities, renounce fixed-income assets and buy an unknown digital token, the first-of-its-kind, and watch it grow beyond your wildest dreams, you would call them crazy, right?

Scandals and thefts

Emerging out of the ashes of the financial crisis, Bitcoin was created as a bypass to the banks and government agencies mired in Wall Streets greatest calamity in decades. At first, it was slow to break through, muddied by a slew of scandals: fraud, thefts and scams turned away many and brought closer regulatory scrutiny. But once it burst into the mainstream, it proved to be the decades best-performing asset.

The largest digital token, trading at around $7,200, has posted gains of more than 9,000,000 per cent since July 2010.

“Bitcoin really captured that wild technology enthusiasm that this time is different,” said Peter Atwater, the president of Financial Insyghts and an adjunct professor at William & Mary in Williamsburg, Virginia.

The performance over the past 10 years, even with its huge run-up and subsequent mega-crash, leaves all others in the dust. It is a massive windfall for those who HODLed through its ups and downs, even as it continues to provide fodder for get-rich-quick schemes. For some, the never-ending fantasy of continually hitting that payoff still helps to keep Bitcoin’s momentum going.

Nothing else comes even close to beating it. The S&P 500 merely tripled in that period. An index that tracks world markets has more than doubled. Gold is up 25 per cent. Some of the best-performing stocks in the Russell 3000, including Exact Sciences Corp and Intelligent Systems Corp, are each up about 3,000 per cent. Those gains pale in comparison to the finance world’s latest, and one of its most controversial marvels.

A brilliant idea

Partly, the monster return is a reflection of the calculus behind Bitcoin’s jumping-off point: the token was not worth anything when someone named Satoshi Nakamoto launched it on Halloween 2008. Designed as a method of exchange that can be sent electronically between users around the world, it did not have a centralised control network. Bitcoin, instead, is run by a network of computers that keep track of all transactions on the blockchain ledger. For many, that technology was reason enough to buy into the idea.

On the other side of the equation are Bitcoin’s devoted enthusiasts who saw in its technology a promising way to change the global financial system.

“This is the first time that there is a real separation – just like church and state – you have a separation of money and state,” said Alex Mashinsky, founder of Celsius Network, a crypto lending platform. “That’s the innovation, thats the excitement.”

But Bitcoin was slow to take off, notching its first transaction two years after its creation, when someone used it to buy pizza.

Since then, the first-born token’s price has catapulted, doubling many times over, and hundreds of imitators have cropped up – some with more success than others.

Many of those who got in early stayed faithful, watching as it made its way through a boom and bust cycle unrivaled by almost anything else over the last decade.

Rise of Bitcoin

At the beginning of 2017, Bitcoin jumped above $1,000. By mid-summer, it had more than doubled. Insanity was unleashed. By year-end, it hovered above $14,000. But as swiftly as it ran up, it fell even faster. By the end of 2018, Bitcoin barely budged above $3,000.

Yet shortly after its crash, it embarked on another huge rally, this time reaching as high as $13,800 in the summer of 2019.

“Certainly the numbers are what appeals to investors,” said David Tawil, president of ProChain Capital. The next 10 years need to be a totally different stage of growth based on totally different factors than the first stage. As much as its made a fortune for speculators and some thieves, Bitcoin’s survival will rest on further adoption. It is not being used as a widespread medium of exchange.

A few large retailers are accepting payment in Bitcoin but it has not been the large-scale embrace so many had predicted. Scams are still running rampant. Interest is waning and consolidation among large owners is at a higher level than it was during the height of the 2017 bubble, which means that their influence over prices could be increasing.

Projections for the next decade abound. In the 2020s, mass adoption is surely to take off, they say. Blockchain technology will revolutionise and solve every problem in the world. On the other hand, regulatory scrutiny is likely to intensify, with central bankers paying closer attention than ever before.

Published on December 31, 2019

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