{"id":33690,"date":"2022-10-31T10:28:58","date_gmt":"2022-10-31T10:28:58","guid":{"rendered":"http:\/\/egrowonline.com\/?p=33690"},"modified":"2022-10-31T10:28:58","modified_gmt":"2022-10-31T10:28:58","slug":"at-14-bitcoin-is-battered-but-battle-tested","status":"publish","type":"post","link":"http:\/\/egrowonline.com\/?p=33690","title":{"rendered":"At 14, Bitcoin is Battered but \u2018Battle-Tested\u2019"},"content":{"rendered":"


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It might have come off as a Halloween prank \u2014 if anyone outside a small group of cryptography enthusiasts had even seen it. The blueprint for <\/span>Bitcoin<\/span><\/a> \u2014 real, internet money circulating beyond the reach of banks or governments \u2014 hit inboxes Oct. 31, 2008.<\/span><\/p>\n<\/div>\n

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Fourteen years later, Bitcoin has emerged from obscurity into a major, if enigmatic, role on the global stage. Leading financial firms offer Bitcoin in retirement accounts, and some countries use it as legal tender, even as it has suffered devastating losses.<\/span><\/p>\n<\/div>\n

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Bitcoin has demonstrated a remarkable staying power in its short lifespan, but it faces a raft of questions in the wake of its latest boom and bust. Regulators around the world are circling. And a new generation of <\/span>cryptocurrencies<\/span><\/a> led by <\/span>Ethereum<\/span><\/a> are offering credible alternatives.<\/span><\/p>\n<\/div>\n

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Garrick Hileman, a visiting fellow at the London School of Economics whose research focuses on <\/span>blockchain<\/span><\/a> and cryptocurrencies, says Bitcoin\u2019s resilience may be a reason for hope.<\/span><\/p>\n<\/div>\n

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\u201cIt\u2019s been battle-tested in a way that no other cryptocurrency ever has \u2026 both in terms of its longevity and how much value it’s been securing over that time,\u201d Hileman says. \u201cNothing else comes close.\u201d<\/span><\/p>\n<\/div>\n

Bitcoin\u2019s origins<\/span><\/h2>\n<\/p>\n
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In 2008, pseudonymous author Satoshi Nakamoto released a white paper that laid out an intriguing vision amid a global financial crisis.<\/span><\/p>\n<\/div>\n

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Posting on an obscure cryptography mailing list, Nakamoto suggested the internet could allow regular people to reclaim autonomy from centers of financial power such as banks and governments.<\/span><\/p>\n<\/div>\n

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\u201cWhat is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party,\u201d Nakamoto wrote in the nine-page document laying out Bitcoin\u2019s basic mechanics.<\/span><\/p>\n<\/div>\n

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If the rhetoric wasn\u2019t polemic, the basic idea \u2014 for some \u2014 seemed downright revolutionary.<\/span><\/p>\n<\/div>\n

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In essence, Bitcoin users would keep records of transactions in a way that would make them difficult to fabricate, duplicate or reverse. When one user would send Bitcoin to another, everyone in the network would be able to view that transaction, record it and attempt to update an immutable shared ledger known as a blockchain.<\/span><\/p>\n<\/div>\n

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Bitcoin launched in earnest in early 2009, but at first it circulated mostly among a hard-core group of users who hotly debated what it could best be used for, what it was worth and how to persuade people to use it.<\/span><\/p>\n<\/div>\n

Pizza and drugs<\/span><\/h2>\n<\/p>\n
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In 2010, Bitcoin made the leap from online experiment to real-world medium exchange. Among the seminal moments was one now-infamous pizza order.<\/span><\/p>\n<\/div>\n

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A Florida man named Laszlo Hanyecz offered to send 10,000 Bitcoin to anyone who would arrange for two pizzas to be delivered to his house. That sum would be worth about $200 million today.<\/span><\/p>\n<\/div>\n

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Before long, Bitcoin settled into a role in the underground online economy. Seizing on the fact that Bitcoin payments can be harder to trace than online bank transactions, people began using it as payment on the dark web, sometimes for illicit products such as drugs.<\/span><\/p>\n<\/div>\n

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In 2014, the online marketplace Silk Road was broken up by the federal government in a highly publicized case. Months later, the major exchange Mt. Gox suffered a breach in which hackers made off with nearly $475 million worth of Bitcoin.<\/span><\/p>\n<\/div>\n

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Bitcoin\u2019s price, which had at one point exceeded $1,000, fell below $400. The cryptocurrency wouldn\u2019t hit four digits again until 2017.<\/span><\/p>\n<\/div>\n

Bitcoin bulls return<\/span><\/h2>\n<\/p>\n
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Bitcoin\u2019s next bull run began in 2017, coinciding with increased interest in the crypto’s underlying blockchain technology.<\/span><\/p>\n<\/div>\n

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More merchants began accepting Bitcoin as payment, and many new cryptocurrencies emerged with ideas about how to improve on Bitcoin.<\/span><\/p>\n<\/div>\n

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While some of the new crypto endeavors have stuck around, others died out with the hype, which began to recede in 2018 amid increasing regulatory scrutiny. Bitcoin persisted as the most valuable cryptocurrency, but its price, which had approached $20,000, fell below $4,000.<\/span><\/p>\n<\/div>\n

To the moon \u2014 and back<\/span><\/h2>\n<\/p>\n
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Bitcoin roared back in 2021 as government stimulus programs intended to steer the global economy out of the COVID-19 pandemic left consumers flush with cash. Investors poured billions into risky assets such as cryptocurrency.<\/span><\/p>\n<\/div>\n

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Bitcoin\u2019s price at one point exceeded $65,000, and its total market capitalization exceeded $1 trillion. But again, the good times wouldn\u2019t last.<\/span><\/p>\n<\/div>\n

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Economic policymakers slammed the brakes on easy money to battle inflation. This move led to drawdowns in many investment classes, including stocks. But the collapse of cryptocurrencies was particularly punishing: By fall 2022, Bitcoin was trading around $20,000 \u2014 close to where it was at the end of 2020.<\/span><\/p>\n<\/div>\n

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Nonetheless, the latest bull run brought in many people who had been skeptical about crypto.<\/span><\/p>\n<\/div>\n

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Catherine Valega, a certified financial planner with Green Bee Advisory in Winchester, Massachusetts, says she has seen questions about crypto from clients decline. But the volume of interest in 2021 pushed her to learn enough about Bitcoin that she now believes it can have a place \u2014 albeit a small one \u2014 in an otherwise diversified portfolio.<\/span><\/p>\n<\/div>\n

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\u201cIf you are a crypto believer, you sort of think it\u2019s similar to the early days of the internet or the early days of the iPhone,\u201d Valega says. \u201cIt remains to be seen how it shakes out, but the technology is pretty incredible.\u201d<\/span><\/p>\n<\/div>\n

The path forward<\/span><\/h2>\n<\/p>\n
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Aside from the economic factors that have dragged on risky assets in recent months, several factors could affect whether Bitcoin ever approaches the highs encountered in 2021.<\/span><\/p>\n<\/div>\n

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