The price of a bitcoin surpassed $ 14,000 on Saturday morning. This was the first time virtual currency has reached this level since January 2018. As of this writing, the currency is trading for around $ 13,800.
Bitcoin, a currency whose name has become synonymous with price volatility, has seen three big hikes in the past. The price of Bitcoin peaked around $ 30 in June 2011, around $ 1,100 in January 2014 and just below $ 20,000 in December 2017. Each spike was followed by a heart-wrenching crash where the currency lost more. of 80% of its value.
After the last bubble peak in December 2017, the price steadily deflated until it hit a low of around $ 3,200 at the end of 2018. It peaked around $ 13,800 at the end of 2018. in mid-2019, fell to $ 4,000 in early 2020 and has now climbed back to $ 14,000. Bitcoin fans are hoping for another boom that will push the currency past the highs of 2017, but that’s far from certain.
The price of Bitcoin has increased even if the first ideas did not come to fruition
The early enthusiasm for bitcoin, between around 2010 and 2015, was based on the hope that it would become a mainstream payment network. It never happened. During times of heavy use, the Bitcoin network can become congested, resulting in extremely high fees and delays of several hours for lower value transactions. Proposals to significantly expand the capacity of the network have been strongly opposed by bitcoin traditionalists.
The third bitcoin boom in 2017 was fueled by a proliferation of new cryptocurrencies and a fad for ‘initial coin offerings’. People who wanted to invest in new blockchain-based currencies often bought bitcoin first and then exchanged the bitcoin for a new token, thus raising the price of bitcoin. Many of those deals turned out to be worthless, souring investors over the concept and triggering a crash in 2018.
What motivates Bitcoin’s latest resurgence is unclear. An important development has been the emergence of “decentralized finance” services that offer blockchain-based alternatives to traditional loans and other banking services. While most of these services are not bitcoin-based, the growing interest in other cryptocurrencies tends to drive up the price of bitcoin. Boosters hope these new “DeFi” services based on smart contracts will disrupt the mainstream financial system. I remain skeptical.
Bitcoin also continues to attract interest from mainstream investors who simply want to diversify into a new asset class. Payment provider Square likely contributed to the current recovery in early October by announcing that it was buying $ 50 million in bitcoin – representing around 1% of the company’s assets – in order to diversify its investments.
Square has described bitcoin as an “instrument of economic empowerment,” touting the potential of technology to expand access to financial services globally. Square has been offering a Bitcoin trading service since 2018.