October 31 marks ten years since the creation of bitcoin - the most popular cryptocurrency in the world. In 2008, Satoshi Nakamoto unveiled the principle of the digital currency network, which was supposed to become an alternative to the centralized banking system. During its existence, the electronic coin has gone from "entertainment for geeks" to getting into the top 5 largest currencies in the world. At the same time, internal technological problems, lack of regulation, hacker attacks and massive speculation have shaken Bitcoin's position. The global cryptocurrency market is stagnant, and its players are counting the days until new growth drivers appear. Will investors' expectations be met - in the RT material.On Wednesday, October 31st, it will be exactly ten years since the birth of the main cryptocurrency of the world - bitcoin. On this day in 2008, a person or a group of persons under the pseudonym Satoshi Nakamoto published an article Bitcoin: A Peer-to-Peer Electronic Cash System. The material disclosed detailed information about bitcoin, and also talked about the principle of conducting transactions with a digital coin.
Initially, it was assumed that the use of cryptocurrency would completely avoid banking and government control, as well as disastrous inflationary consequences.
Bitcoin exists on the basis of blockchain technology - a single database that contains information about all transactions carried out. According to the authors' idea, unlike the endlessly printed paper money, the amount of bitcoins is limited and can be a maximum of 21 million "coins".
Crypto coins are issued due to mining - solving complex mathematical problems and the appearance of a new block in the blockchain network. Each such block is an array of data, where information about transactions carried out after the creation of the previous block is entered. As a reward for solving the problem, miners receive a reward in the form of bitcoins.
It is noteworthy that over time, the search for such blocks becomes more difficult and requires more and more computing power, and the reward for mining decreases. So, in 2009 it was 50 bitcoins per block, in 2012 - 25, and in 2017 - only about 12. To date, 17.3 million "coins" have already been mined. The last bitcoin is expected to be mined only by 2140.
The bitcoin network itself began its work on January 3, 2009. It was then that the first block appeared on the blockchain and 50 electronic coins were mined. Note that at that time, the cost of each bitcoin was significantly lower than $1.
“The original ratio was $ 1 per thousand bitcoins. Nobody calculated the value of one "coin", since it was not possible due to the negligible figure. Interest in bitcoin was supported only by its novelty and uniqueness of the project, "Murad Salikhov, advisor to the chairman of the board of the Financial Innovations Association, recalls in an interview with RT.
According to Andrey Lugovoy, General Director of the Cryptolion company, from the first days of Bitcoin's existence, crypto enthusiasts, who were able to recognize the potential of this technology, showed the greatest interest in it. Nevertheless, according to experts, for a long time cryptocurrency remained nothing more than "entertainment for geeks."
In May 2010, the first Bitcoin purchase was made. American programmer Laszlo Hanich bought two pizzas in exchange for 10 thousand crypto coins - $ 65 million at the current exchange rate.
The first steps
In 2011, the cryptocurrency rate reached $ 10. At the same time, the first large-scale hacker thefts of digital money began. For example, according to Murad Salikhov, 25 thousand bitcoins were stolen from the electronic wallet of the founder and participant of the Bitcoin Forum. As the expert notes, against the background of repeated cases of theft and hacking in 2011, confidence in crypto money as a promising instrument for mutual settlements and investment began to decline.
However, later the interest of crypto investors began to grow again, and already in 2013 the bitcoin rate overcame $ 100. In November of the same year, there was a sharp price jump after the digital currency was supported by the major American browser game creator Zynga. The cost of one coin rose above $ 1,000, but after that there was a correction, and from August 2014 to July 2016 the rate did not exceed $ 600.
As Veselin Petkov, an analyst at Alpari, explained in an interview with RT, the value of any asset, including bitcoin, depends on supply and demand. Accordingly, the more people use cryptocurrency as a means of payment and the more often transactions are carried out, the more intensively the price grows. At the same time, according to the expert, along with the possible prospects of blockchain technology, interest in bitcoin in the early years of its existence was also fueled by the global financial crisis.
“In the period 2008-2012, the distrust of financial participants in the actions of central banks increased significantly. The reason for this was the injection of a colossal amount of new money into the global economy. Therefore, there was interest in creating such a currency that would not be centralized. It was then that bitcoin emerged as an alternative to fiat (real) money, depending on the monetary actions of central banks, "Petkov explained.
In other words, in the post-crisis years, the most active investors in bitcoin were people who believed in the emergence of an alternative to a centralized banking system. However, Bitcoin did not manage to gain a foothold above the level of $ 1,000 for a long time due to the fact that its concept and main advantages remained not fully understood, Murad Salikhov notes. Against this background, market participants were cautious about investing in a new financial instrument.Spontaneous success
In the second half of 2016, a noticeable recovery began again on the market, and in February 2017, bitcoin again crossed the $ 1,000 mark.In March, the digital asset was already worth more than a troy ounce of gold - at that time, above $ 1,235, and in April Japan officially appropriated the crypto coin the status of the payment instrument.
In August, bitcoin broke another record and rose above $ 4 thousand. Financial analysts explained the rapid growth in investor confidence, demand in the Japanese market and the expectation of the activation of the Segregated Witness protocol. He had to solve the issues of the scalability of the Bitcoin network, as well as the speed of transaction confirmation and lower fees. At that time, experts predicted a rise in price for a digital coin to $ 5 thousand.According to Veselin Petkov, it was the scaling problem that became a stumbling block for the further development of the crypto coin. According to Nakamoto's idea, each block of the network contains only 1 megabyte of information about transactions (data about senders, recipients, the number of transferred bitcoins). This limitation made encrypted transaction records less vulnerable to hacker attacks.
The block size of 1 megabyte allows you to correctly process only three to seven transactions per second. At the same time, it takes about 10 minutes on average to form a new block in the network. Therefore, against the background of the growing popularity of cryptocurrency and the rapidly increasing number of transactions, the system did not have time to process all transactions. So, according to Petkov, in the period from 2015 to 2017, the average number of relevant transactions increased from 100 thousand to 300 thousand per day.
“So the ecosystem faced a scaling problem and transactions started to freeze. Logically, at this moment the price of bitcoin should have stopped growing. However, it continued its rally as many believed the scaling problem would be resolved in the coming months. Nevertheless, their vision did not come true and a solution has not been found so far, ”the expert added.
In September 2017, the market was covered with a powerful wave of negativity. The People's Bank of China has officially banned ICOs (initial placement of cryptocurrencies), as well as trading on local cryptocurrency exchanges. Then the price of bitcoin fell by 35%, but soon recovered and continued to strengthen. The growing popularity of the cryptocurrency confidently pushed the rate, and at the end of autumn the "cue ball" was already trading above $ 10 thousand.
Along with the factor of the appearance of an increasing number of interested investors, the price of bitcoin was pushed by its limited emission (no more than 21 million "coins"), explains Andrey Lugovoi. Moreover, according to Murad Salikhov, the explosive growth in value was also associated with the lack of unified market regulation.
However, Bitcoin was expecting a real rally in December. In the first week of the month alone, the digital asset has risen in price by 55%, exceeded $ 16 thousand and with a capitalization of $ 270 billion entered the top 5 largest currencies in the world. The excitement around the electronic coin and its counterparts continued to grow rapidly, and large financial investors began to connect to cryptocurrency operations. So, in mid-December, the Chicago Commodity Exchange launched trading in long-term Bitcoin contracts.Against the backdrop of a strong rise in the price of bitcoin in 2017, a large number of non-professional investors joined the market. They simply bought cryptocurrency after reading stories about people who got rich on digital money in the media and on forums. They also did not have a good understanding of what cryptocurrency is and knowledge about the scaling problem. All this provoked excitement in the market and led to a strong overbought bitcoin ", - said Petkov.
On December 17, Bitcoin surpassed $ 20,000 per coin. At the same time, well-known world investors, economists, as well as heads of central banks began to talk about the excessive overheating of the market and the imminent “collapse of the bubble”. The authorities of some countries have begun to advocate strict regulation or the complete abolition of trading operations with tokens in order to save inexperienced investors from the collapse of cryptocurrencies. The situation was aggravated by the frequent hacker attacks on crypto-exchanges around the world by that time.
Digital getaway
Ultimately, the main fears of experts and analysts were realized in early 2018. In January, the capitalization of the entire cryptocurrency market almost doubled in less than ten days. If on January 7 it exceeded $ 830 billion, then in ten days it reached $ 431 billion.
In the cryptoindustry, January 17 was called Black Tuesday - Bitcoin fell from $ 20,000 in December to $ 9.6K, Ethereum sank from a record $ 1.4K to $ 805, Ripple - from $ 3.74 to $ 0.9, and Bitcoin Cash - from $ 3.9 thousand to $ 1.4 thousand. As experts explained, large investors began to withdraw their "coins" into real money.
Many associated the explosive growth at the end of 2017 with the turbulent political situation in recent years - sanctions, crises, bankruptcies. Capital flowed from one offshore to another, and with the help of bitcoin it was done more calmly. Cross-border transactions are impossible to block and very difficult to trace. Then, when this process ended and the cryptocurrency was transferred back to fiat, the rate moved down, ”recalls Andrei Lugovoi.
In addition, as noted by Murad Salikhov, investors began to lose interest in the cryptoindustry and began to leave the market due to the increased number of thefts and fraud on exchanges.
Meanwhile, according to Veselin Petkov, many market players have also come to understand the problem of scaling. Thus, many cryptocurrency enthusiasts have lost their former optimism. Therefore, the price of bitcoin began to return to its fundamentally justified levels of $ 4.8-7 thousand.
Standby mode
Although the market began to gradually recover by the end of January, sales resumed in early February, and simultaneously with the tightening of the rhetoric of the financial authorities of states and hacker attacks, cryptocurrencies fell to new lows. On February 6, market capitalization dropped to $ 287 billion, and bitcoin sank to $ 5.9 thousand.Over the next months and until today, the market has repeatedly tried to grow, but all attempts to strengthen ended in recession, and the record values of December - January were never reached again ...
Since the beginning of autumn, bitcoin has been trading in the range of $ 6.5-7 thousand. According to Veselin Petkov, the cryptocurrency network processes about 300-400 thousand transactions per day. Therefore, in order to exit the current price corridor, the market needs to receive significant signals about a possible solution to the scaling problem in the near future. In addition, the digital asset still remains high-risk, so investors are in no hurry to actively increase their own investments again.
“Now the rate cannot rise above $ 8 thousand, since the cryptocurrency market is manipulative. A fund with $ 500-700 million can easily raise and lower the bitcoin rate. This is also facilitated by the lack of regulators on cryptocurrency exchanges, ”said Andrei Lugovoi.
In Russia, the cryptocurrency fever has also begun to subside. The chairman of the Central Bank Elvira Nabiullina announced this in mid-October.
According to experts' forecasts, the cryptoindustry will continue to develop, but much more slowly and along with growing interest from states.
Veselin Petkov does not exclude that bitcoin may enter the oversold zone at some point. In this case, the price of the asset will decrease even more. According to the expert, from a fundamental point of view, the key driver for the market should be a solution to the scaling problem, which the Bitcoin Lightning Network (LN) protocol can allow.
According to the estimates of the creator of the Litecoin cryptocurrency, Charlie Lee, LN will be actively working in the spring of 2020. At the same time, one of the key representatives of the Ethereum community, Joseph Lubin, believes that the scaling of cryptocurrencies can take quite a long time and take from five to six years.
