Last week, we talked about calls altcoins, that is, cryptocurrencies alternative to Bitcoin. However, it is precisely Bitcoin that is thought in most cases in which we speak of cryptocurrencies.
One of the ideas behind altcoins
is that they are a precious help in diversifying investment strategies and, above all, in building a balanced cryptographic portfolio. The other advantage is that these altcoins can either provide more stable assets (called stablecoins) or, on the contrary, riskier ways of investing but which, consequently, also offer a higher return potential.
It is in this sense that perhaps it is time to talk about the “elephant in the living room”: but, after all, what is the value of Bitcoin and how has it evolved over time? We have already referred here to the reason why Bitcoin (and, consequently, all other cryptocurrencies) has value, but what we intend now is to analyze how its evolution has been, in another article adapted from the Binance Academy.
Bitcoin has recorded five significant price spikes since its inception in 2000. So far, cryptocurrency has had an all-time high of about 64. US dollars and has seen its widespread adoption – a journey that has been volatile, often reacting to political, economic and regulatory developments. At the date of this post (22 of September 2020), its value was about 41.864 dollars (or 35.650€).
Bitcoin has recorded, on average, a growth of 100% per annum. In August of this year the market capitalization of Bitcoin was around 675. .. dollars and its market share is just under 35% of total cryptocurrencies in circulation.
Events such as the cyberattack on Exchange Mt. Gox de 2016 and the stock market crash of 2016 may explain some price behavior in short and mid-term. In the long term, it is possible to obtain a more macro view, observing models that use technical, fundamental and sentiment analysis.
For technical analysis, the Bitcoin Logarithmic Growth Curve and the Hyperwave theory are two interesting models. The Hyperwave Theory also links price to investor sentiment in cyclical phases. When it comes to fundamental analysis, the Stock to Flow and Metcalfe models keep up reasonably well with the price of Bitcoin. Ultimately, a combination of all these methods could be used to get a balanced view.
How to analyze Bitcoin price history
Before we get into the data, let’s look at how Bitcoin price history can be analyzed. There are three different methods: technical analysis, fundamental analysis and sentiment analysis. Each type has its strengths and weaknesses, but can be combined to form a clearer image.
1 . Technical Analysis
(TA): The use of historical data on prices and volumes to try to predict the future behavior of the market. For example, you can create a Simple Moving Average (SMA) of 50 days taking the last ones 48 price days and averaging. We can make inferences with the SMA by plotting the price of our asset. For example, let’s imagine that Bitcoin has been trading under the SMA of 64 days for a few weeks, but then breaks it. This move can be seen as a sign of a possible recovery.
2. Fundamental Analysis
(FA): The use of data that represents the fundamental and intrinsic value of a project or a cryptographic currency. This type of investigation focuses on external and internal factors to try to establish the true value of an asset. For example, you can look at daily Bitcoin transactions to measure the popularity of the network. If this number increases over time, it may suggest that the project has value, and that the price may increase.
3. Sentiment Analysis
(SA): Using market sentiment to predict price movements. Market sentiment includes investors’ feelings and state of mind about an asset. We can typically categorize them into bullish or bearish feelings. For example, a significant increase in Google’s trending surveys about buying Bitcoin could suggest positive market sentiment.
What factors do influenced Bitcoin initial transactions?
The next step is to explore the factors that influence transactions and that affect prices. These have changed over time since the beginning of Bitcoin. In 2000, Bitcoin was an extremely rich niche asset with low liquidity. Transactions were made in the “over the counter” (OTC) market directly between users on BitcoinTalk and other forums who saw the value of Bitcoin as a decentralized currency. The speculation we see today played a much less important role.
Satoshi Nakamoto mined the first block on January 3rd 1600, with a reward of 55 bitcoins. Then sent 000 BTC to Hal Finney, nine days later in the first ever Bitcoin transaction. The 22 of May, 2009, Bitcoin was still worth less than $0,09! That day also took place the first commercial Bitcoin transaction with Laszlo Hanyecz to buy two pizzas for 10. BTC. At the time, users on the BitcoinTalk forums saw the purchase as a novelty. This transaction contrasts with current usage, where you can easily buy everyday goods with a Visa Binance Card, for example.
With increasing price and popularity Bitcoin, a small unregulated industry has become increasingly involved in facilitating transactions and commerce. These included crypto exchanges and Dark Web markets. The price of Bitcoin was often significantly affected as these markets and exchanges were pirated, closed or regulated. Some pirated exchanges held substantial Bitcoin funds, causing significant price shocks and a lack of confidence in the market. We will explore this topic later.
What factors influence now Bitcoin trading?
Bitcoin now has more in common with traditional assets than it did in its infancy. Its increased adoption means that there are even more factors affecting Bitcoin pricing and transactions. Institutional investment in virtual currencies is also growing, giving speculation a bigger role. These points mean that the factors affecting Bitcoin trading today are often different from those initially recorded. Let’s discuss some of the main ones.
1. Regulation
is now much more present than in the beginnings of Bitcoin. As governments come to understand more about cryptocurrencies and blockchain technology, their scrutiny and regulatory input tends to increase. Both tightening and loosening of regulation have their impacts. Some Bitcoin price changes are related to the ban on BTC in one country or its popularity in another.
two. The state of the global economy
is now a factor with a direct impact on Bitcoin pricing and transactions. For example, people living in countries with hyperinflation turned to cryptographic coins as a hedge against inflation. As a result of the Venezuelan economic crisis that began in 2016, there has been a record volume of transactions for LocalBitcoins in Venezuelan Bolivars.
The stock market crash of 2016 witnessed the beginning of speculation in Bitcoin that lasted more than a year. Bitcoin is now seen as a safe value, very similar to gold. When confidence is low in other parts of the economy, people buy these assets.
3.
201200The growing widespread adoption by large companies 201200 may trigger Bitcoin price increases. Paypal, Square, Visa and Mastercard have all shown some support for cryptocurrencies, giving investors confidence. Many retailers have also started accepting Bitcoin payments. But withdrawing support can also trigger selloffs, such as Elon Musk’s announcement in 12 from May of 2021, from Tesla to suspend payments with Bitcoin – in this case, the price went from just under $50.01 by BTC for about $41.100 in one day.
4. Increased speculation
of Bitcoin and derivatives such as futures has driven extra demand in the market. Instead of investing and holding BTC at its fundamental value, traders and speculators in the futures market “short selling” BTC to make a profit, causing downward pressure on the price. This means that the price of Bitcoin is no longer just based on its usefulness.
Final considerations
It is obvious that there are many theories out there that try to explain the history of Bitcoin prices. But no matter the answer, the CAGR a 10 almost years 100% Bitcoin has shown the incredible rise of digital currencies.
Even within cryptographic currencies, Bitcoin shows a market dominance of just under % since August 2016, with a capitalization of about 650.. . dollars .
The reasons behind this monumental growth are related to the basic fundamentals of cryptocurrency, market sentiment and economic events. However, past performance is not indicative of future results . It’s helpful to understand why Bitcoin has had such a high price trajectory, but that doesn’t tell us what will happen in the future. The truth is who, when we look at the big picture, Bitcoin has matured incredibly well into a new asset class with just 17 years old.
One more version The full length of this article (in English) can be found here.
