When Bitcoin began in 2009, it was the first successful cryptocurrency to launch to the public. Twelve years later, its value hit an all-time high of over $53,000 per coin. To know where this new type of investment is headed, one should review its rocky history.
The year after Bitcoin began, someone used 10,000 BTC to buy 2 pizzas. This transaction assigned monetary value to Bitcoin for the first time. 3 years later in 2013, Bitcoin rose to $1,000 for the first time before crashing to $300. It would take 3 more years for Bitcoin to recover, but the cryptocurrency didn’t sit idle during that time. During the mid-decade, the number of establishments, banks, and fintech institutions accepting and investing in cryptocurrency grew steadily.
Despite new cryptocurrencies entering the market, Bitcoin held its place. In 2017, Bitcoin’s price jumped from under $1,000 to over $19,000 in a single year. Unfortunately, it did not hold its position; legal troubles for the cryptocurrency market drove value down by 70% in 2018. Despite these setbacks, Bitcoin still outperformed the best stocks on the market in 2019. When the global economy slowed for the pandemic, risk-loving investors looking for high returns were poised to see Bitcoin as an attractive option.
The appeal of Bitcoin goes beyond speculation. Due to the massive influx of US dollars into the system in 2020, inflation fears are widespread. Bitcoin manages its finite supply by halving the rewards its miners receive for processing transactions every 4 years. By keeping tight control of the supply of verified Bitcoins in the world, an investment in Bitcoin can be used as a hedge against inflation. This is similar to how commodities like gold have functioned in the past.
As the Bitcoin bull run grows in both value and acceptance, major companies are capitalizing on the moment in their own way. Tesla recently purchased $1.5 billion worth of Bitcoin and declared its intentions to accept the cryptocurrency as payment. Not to be outdone, Apple Pay began accepting BitPay, a prepaid Bitcoin MasterCard. Bitcoin is an acceptable form of payment anywhere MasterCard is allowed to be used. As 2021 moves forward, many expect to see rapid adoption of crypto cards, emergence of new use cases, and increased crypto investing from traditional finance leaders.
With cryptocurrencies tearing past expectations, eager investors should be aware of the cost of mining coins. Cryptocurrency may be digital, but it takes a great deal of energy to both run and produce. In 2018, the mining of cryptocurrency accounted for 1% of global energy consumption. 2 years later, Bitcoin alone consumed 120 gigawatts per second. For perspective, that is the equivalent of power generated by 49,440 wind turbines. That amount of electricity usage is unimaginable to most individuals, and it’ll only grow with demand.
Despite the risks and costs of the system, many are betting big that crypto will be the future of currency. Don’t let yourself be left behind in the race to the future!
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