Bitcoin is the first and the largest cryptocurrency present in the crypto market. Since its creation in the year 2008, it is the most valuable digital asset in the whole FinTech Industry. Bitcoin’s market valuation alone today stands at more than 1.2 Trillion USD. That is more than the individual value of Facebook, Tencent, Alibaba, or Samsung. Bitcoin is considered the leader of all cryptocurrencies. As the valuation gap between the second most valued cryptocurrency, Ethereum, is almost three times.
Bitcoin first came in the news and under the large investor’s radar in the year 2017, during its fifth price bubble. It started the year at around $975 and made an exceptional jump to $20,089, on March 25. That is around 20,000% bounce in three months. People who had invested in Bitcoin were blown out of their minds. Later, in the same year on 22 Dec, Bitcoin’s prices crashed 45% to fall below $11,000. It was extremely volatile during the last few of 2017 and the first few years of 2018. There was news of a Japanese Exchange hacked out of around half a Billion Dollars in Cryptocurrencies. And speculation on the ban on Bitcoin by South Korea drove the prices further lower.
The reason behind Bitcoin pullbacks after every crash
Bitcoin has formed price bubbles around seven times in its entire existence. That means it has crashed like anything, seven times. But how has Bitcoin managed to pull back every freakin’ time? The main reason behind this is that Bitcoin is a decentralized digital currency, which holds the maximum value. And has the potential of huge value appreciation as said by JP Morgan itself, who has predicted Bitcoin to reach around $146,000 in the long run. Their assumption is based on the fact, that Bitcoin could come as a competitor to one of the most popular investment assets, Gold.
Coming back to the point, decentralization of Bitcoin simply means it is an unregulated currency, with no government involvement in its transactions. Many large enterprises would prefer to work under the hood, to have the least involvement of the regulators. It could be to bring flexibility and convenience to their businesses or an attempt to save taxes or to defraud the government. Then there is a huge market on the dark web for illegal products. All of the illegal transactions can be made through crypto easily. Accepting payments for illegal goods through Bitcoins is extremely convenient for illegal dealers or traffickers. So, Bitcoin has achieved a monopoly in the illegal transaction business. And that is the most significant need for Crypto that cannot be withdrawn by any other asset class.
How is Bitcoin gaining so much value in the market?
One Bitcoin today is valued at 66,000 USD. A person could buy a Tesla Model Y with that amount, and will still have some money left for its modifications. Bitcoin started its journey in 2008 with $1 and within 13 years Bitcoin has returned an astronomical figure which I’d rather not write.
But how is Bitcoin gaining so much value over other assets like Facebook, Apple, or Real Estate?
The simple explanation for that is the companies that have been mentioned above and their stocks are all managed by the companies. They usually perform regular stock splits and offer Bonus shares to keep their stocks at a price where the general public can easily invest in them. For Example, Berkshire Hathaway Class A shares, the world’s most expensive share, never did the stock split. This is why it is valued at 431,000 USD. So, the retail investors who wish to invest in this company can invest only by purchasing its Class B shares. That is valued at 285 USD. Bitcoin as a cryptocurrency is an unregulated financial instrument. This is why no one is there to perform the Crypto-splits or anything like that.
Then there is one other thing, stocks cannot be bought in decibels. While Bitcoins can be bought with any amount in pieces or parts. This is why it doesn’t really matter where Bitcoin’s price reaches, as it can always be bought with lesser amounts in pieces. And why it is gaining so much value in the market.