Bitcoin meltdown or rebirth?
October 31, 2018
Since its first mention on October 31, 2008, in an academic paper by an undisclosed person calling himself Satoshi Nakamoto, Bitcoin has seen truly tumultuous times.
The person or group behind the pseudonym said the objective was to come up with a scheme enabling people to make payments "directly from one party to another without going through a financial institution."
What sounded like a sober statement to make in fact contained a revolutionary idea — creating a payment system with easy access by everyone that lenders, including central banks, would have no way of controlling. But the implementation of such a system remained vague.
"Right now, Bitcoin feels like the internet before the browser." (Wences Casares, founder of Banco Lemon in Brazil)
Block plus block forms a block chain
A couple of months later, the first bitcoins were born, called the genesis block. Every new block would later be attached to the previous one, thus bringing into being what's now known as a block chain, or blockchain technology.
"Email to the internet is the equivalent of Bitcoin to blockchain; it brought the underlying technology to the masses." (Dennis Austinat, head of Germany, Austria and Switzerland at eToro)
It took another year until the first Bitcoin payment was recorded when a man in Florida made a pizza delivery guy accept 10,000 of the cryptocoins for two pizzas — worth roughly $41 (€36) at the time and $30 million (!) today.
Another memorable event was the rise and fall of what used to be the main Bitcoin exchange. It was based in Tokyo and was known as Mt. Gox. After being hacked, it was forced to file for bankruptcy in early 2014 after losing about $477 million in cryptocurrencies.
"If there's one positive takeaway from the collapse of Mt. Gox, it's the willingness of a new generation of Bitcoin companies to work together to ensure the security of customer funds." (Coinbase CEO Brain Armstrong)
Bitcoin value soaring, and plummeting, beyond belief
That hacking scandal didn't stop Bitcoin's value rising from $1,000 per piece to well over $19,000 in December 2017.
It didn't take long before the bubble burst, with wild fluctuations occurring until the cryptocurrency settled somehow at a much lower level (1 Bitcoin equaled $6,270 at the time of writing), becoming less attractive for people looking for a quick return on their investment.
You still can't sell the currency on a major financial exchange. It's exchanged like money, but it's not backed by any central bank.
ETF to decide on Bitcoin's future?
What Bitcoin's staunch supporters are hoping for most is an exchange-traded fund (ETF) as a security designed to track the currency's value. But such an ETF needs approval by the US Securities and Exchange Commission (SEC), which is no easy hurdle to take.
SEC approval would be a major breakthrough for Bitcoin as its reputation among big investors would be boosted immediately. However the commission has so far been reluctant to give the green light, citing risks of potential fraud.
"Stay away from it, it's a mirage. In terms of cryptocurrencies generally, I can say almost with certainty that they will come to a bad ending." (Warren Buffett, CEO of Berkshire Hathaway)
The truth is that nobody really knows right now whether the cryptocurrency can eventually live up to erstwhile expectations. But it's already turned some of its early fans into millionaires, and former millionaires into desperate hodlers [in the Bitcoin community, a hodler is a person who does not sell, but rather holds on to Bitcoins no matter what]. And maybe, he who laughs last laughs longest.
BitPay CEO Stephen Pair to DW: "I would say Bitcoin's future is as bright as ever…, Bitcoin continues to serve a primary and dependable role in the industry."