Bitcoin is the most widely known and used digital currency. It is the one that launched the cryptoactive revolution in 2009 and promoted the Blockchain technology.
12.5 bitcoins are emitted on average every 10 minutes by a “mining” process and this emission will slow down until 21 million bitcoins are in circulation by 2140.
In the same way as for precious metals, the price of Bitcoin is determined by marketplaces solely on the basis of supply and demand.
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What is Bitcoin?
Bitcoin is a peer-to-peer network, global, without a central authority, open to all, transparent and resistant to censorship.
History of Bitcoin
After the subprime crisis and the bankruptcy of Lehman Brothers, which demonstrated the profound shortcomings of the current financial system.
How does Bitcoin work?
Bitcoin is an innovative peer-to-peer payment network and a new form of money. Bitcoin is decentralised and is not controlled by any company or government.
Bitcoin, a 24-hour asset
As with traditional stock market assets, the price of Bitcoin (BTC) is determined by supply and demand. Bitcoins are bought or sold on specialised marketplaces, where buyers and sellers agree on a price. A supply greater than demand will lower the price. Conversely, a demand greater than supply will increase it.
The major difference between Bitcoin and, for example, company shares is that crypto marketplaces are open 24-hours a day, 7 days a week. While the main world stock exchanges close in the evenings and on weekends. The price of Bitcoin therefore varies constantly. In this way, it is closer to the Forex market where fiduciary currencies are traded, which is also permanently open.
Bitcoin can be exchanged for different currencies
Our Coinhouse platform allows you to buy Bitcoins for euros. But all over the world, depending on the country from which they operate, specialized platforms make it possible to exchange Bitcoin for the world’s main fiduciary currencies, first and foremost the dollar, yen, yuan, pound sterling…
Bitcoin, a bullish asset since its launch
The Bitcoin blockchain has been in existence since 2009, but overall, Bitcoin’s first exchanges on marketplaces date back to 2010. At the time, a Bitcoin was only worth a few cents!
One exchange that remains known in the cryptocurrency ecosystem is the purchase of two pizzas in May 2010 by a web developer for 10,000 bitcoins. A transaction that makes them the most expensive pizzas in history today!
A quick look at the Bitcoin price with a very long-term view is irrefutable: this asset is on an upward trend since its creation:
The increase in the price of Bitcoin has been dramatic over the past ten years. This increase was marked by a few major moments:
- A Bitcoin was only worth a few dollars or euros in 2012 when there were still few marketplaces offering it
It stands at around 10 euros (13 dollars) at the beginning of 2013 before starting a powerful bull market that will make it reach a peak around 1000 euros (1150 dollars) at the beginning of 2014. The first interests for Bitcoin outside the purely nerd sphere then appeared. The first and most daring businesses were beginning to accept payments in Bitcoins, and the world of Finance was watching this new asset with a cautious but careful eye.
- Things then became more complicated with two difficult years in 2014 and 2015. At the beginning of 2014, Mt Gox, at the time the largest marketplace for Bitcoin, went bankrupt and many Bitcoins were lost. This was a major blow for the market, which was experiencing a major crash. Bitcoin lost 87% of its value and fefll back to around 180 euros (200 dollars).
- The year 2015 remained sluggish with little changes in assets. It is however in this period that interesting ”altcoins” (other cryptocurrencies created after Bitcoin inspired more or less) appeared, first and foremost Ethereum (ETH). They helped diversify the ecosystem.
- After much debate in the Bitcoin community, the market was able to catch its breath. The concept of ICOs (cryptocurrency fundraising), mainly driven by Ethereum, recreated a lot of interest in the cryptocurrency market. A new bull market was emerging, the media were seizing these new technologies and the whole thing raced forward to end up with strong excesses at the end of 2017. The price of Bitcoin reached its highest level to date, at 17,000 euros, or nearly 20,000 dollars
- Same excess and same sanction as in 2014, the year 2018 was marked by a new sudden drop in the whole market, the Bitcoin giving up about 80% of its value fell back to 2800 euros (3200 dollars)
- With the frenzy subsiding, 2019 seems to be the beginning of a new bull market for Bitcoin, which has already gone from 3600 to 12,000 euros (4000 to 14,000 dollars) between April and June 2019. The price is consolidating again for the time being.
Why is Bitcoin volatile?
As we have seen, the price of Bitcoin has fluctuated, sometimes sharply, since its creation. It is a much more volatile asset than equities, which are already considered to be the most volatile in the family of so-called traditional assets. There are two main reasons for this volatility :
Bitcoin is a relatively young asset, compared to other asset classes such as listed equities that have existed for decades, or even more significant, to assets such as gold or real estate. Bitcoin therefore seeks its price, which is subject to strong fluctuations of up to more than 10% per day when supply and demand occur in periods of frenzy. Although Bitcoin has strong fundamentals, many of its strong fluctuations are mainly due to speculation.
The cryptocurrency market is still very poorly capitalized compared to other markets such as equities or bonds. At the end of September 2019, it represented 210 billion dollars, Bitcoin alone represents 145 billion dollars in this market. These sums may seem significant, but in the capital markets sector, it is only a drop in the bucket. It does not take so much capital (in the eyes of major financial market players such as hedge funds) to cause cryptomarket prices to rise or fall significantly. The market is therefore still in a maturing phase. A gradual increase in capitalization with the arrival of new players will make the market less prone to violent excesses of volatility.
What will be the price of Bitcoin in the future?
A question that cannot be answered precisely. The price of Bitcoin varies widely and short-term price reactions are very difficult to predict. But from an investment perspective, everything suggests that Blockchain and cryptocurrencies represent a major evolution in the world of digital and finance. The value of Bitcoin should therefore continue to appreciate over the long term. We invite you to use our ROI (return on investment) calculator to check how much you would have earned (or lost) by investing a specific amount on a specific date in Bitcoin!
Blockchain or smart-contract projects led by Ethereum even have the ability to disrupt certain sectors such as banks or insurance companies. Value exchanges should also be much faster and much easier. But all this takes time.
Bitcoin alone has characteristics that make it a unique asset, first in terms of value reserves and probably in the future in terms of a much larger scale currency of exchange. Issues of decentralization and security of exchanges are at the heart of many debates. The best way is to keep abreast of the major news in the ecosystem so as not to miss major developments that may herald future increases in the price of cryptocurrencies.