10 years of Bitcoin: A look back through cryptocurrency history

The last week of October marked the ten-year anniversary of the foundation of bitcoin, the world’s first cryptocurrency that drove the creation of an entirely new asset class for financial markets.

The origins of bitcoin can be traced back to Oct. 31, 2008, when a whitepaper on the subject was published by Satoshi Nakamoto. This document went on to become a founding text for the digital currency, leading to the world’s first bitcoin transactions shortly after.

It’s difficult to ascertain by exactly how much bitcoin has increased in value, because its value in 2008 was in the fractions of cents. However, according to estimates, the currency’s value has grown by more than one million fold from an early price of less than $0.01 to current prices of around $6,300 per coin.

While bitcoin has its fair share of supporters, critics and skeptics have voiced concerns about the highly volatile nature of cryptocurrency trading, as well as the increasingly large amounts of energy required for bitcoin mining – the process by which new bitcoin are released.

As the buzz around bitcoin continues, Argaam takes a look at the key milestones in its history and what the future may hold for the currency.

Milestones

2008: A nine-page long paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published by Satoshi Nakomoto, whose identity remains a secret to this day. The document outlined a system that would allow people or companies to carry out online payments without the involvement of a financial institution. Time-stamped transactions would be recorded in a distributed public ledger that would become known as a blockchain.

The aim was to give people back the power to control their money, particularly in light of the global financial crisis, which led to widespread distrust in banks and major financial institutions.

2009: Nakomoto mined the first 50 bitcoins in January 2009 and started the Bitcoin payment network. Nakomoto sent 10 bitcoins to cryptographer Hal Finney as a test, in what was the first recorded exchange of the currency.

2010: Software programmer Laszlo Hanyecz made the first purchase using bitcoin on May 22, 2010. He paid 10,000 bitcoins – then worth less than $100 – for two Papa John’s pizzas, marking the first “real-world” bitcoin transaction. The sale is worth around $63 million today.

2013: While Bitcoin’s journey was slow at first, the cryptocurrency hit the mainstream in 2013 amidst ‘hyperinflation incidents’ that saw its value increase several-fold. In late 2013, the value of bitcoin spiked from around $100 per coin to $1,000 in just over a month, before halving in value over the next three or four months.

2017: After three years of relatively calm trading, bitcoin skyrocketed in value in 2017, going from around $1,000 per coin to close to $20,000, as new investors began to jump on the bitcoin bandwagon. The fact that bitcoin software guarantees only a finite supply of coins could have added to the fear of missing out for many investors.

The year 2017 also saw financial institutions make their first public efforts to enter the crypto arena, with two US exchanges, the CME and Cboe, creating platforms for customers to trade bitcoin futures. Several other major banks also announced projects involving crypto, further fueling bitcoin’s surge. The bubble, however, began to burst in late December, shortly after futures were launched. By the end of January 2018, bitcoin had halved in value from around $20,000 per coin to $10,000, amid fears of regulatory crackdowns on the cryptocurrency.

2018: Bitcoin continued to decline earlier this year, before eventually stabilizing at levels of around $7,000. The currency has traded in a range of between $6,000 and $7,000 since June. On its 10-year anniversary on Oct. 31, 2018, it was at $6,304.18.

What does the future hold?

Bitcoin’s influence and dominance of the cryptocurrency space is likely to “drastically reduce” in its second decade, but the crypto market will likely expand by “at least” 5,000 percent in the next 10 years, Nigel Green, founder and CEO of deVere Group, said in a recent note.

As mass adoption of cryptocurrency grows, more and more digital assets will be launched by organizations in both the private and the public sectors. This will increase competition for Bitcoin and dent its market share, Green said.

“In addition, it is likely that Bitcoin will be hit by the superior technology, features, and problem-solutions, offered by existing and yet-to-be-released cryptocurrencies,” he noted.

According to Denmark’s Saxo Bank, emerging markets (EMs) could drive growth in cryptos going forward, with China set to continue to dominate the global mining order.

“Some believe that cryptocurrencies are volatile and a poor store of value, while others in emerging economies under oppressive monetary regimes view cryptocurrencies as a mechanism to protect wealth and store value,” said Jacob Pouncey, cryptocurrency analyst at Saxo Bank.

In Q4, Saxo Bank expects that EMs will continue to play an ever-increasing role in the growth and adoption of cryptocurrencies.

“The most distressed EMs seem to be the canaries in the coal mine. With uncertainty and geopolitical risk increasing, cryptocurrencies could rise again if the global monetary system is tested,” Pouncey noted. 

Write to Jerusha Sequeira at jerusha.s@argaamnews.com