While bitcoin has been a resounding success for a year and asserts itself in its role as the flagship of cryptocurrencies, RT France takes stock of the origin of this virtual currency, its strengths and weaknesses.
Still confidential a few years ago, cryptocurrencies are experiencing tremendous success. In front of ethereum, dogecoin or even ripple, bitcoin is the standard bearer of new digital currencies. While the total value of bitcoins crossed the $ 1 trillion mark on February 21 – a bitcoin was then traded for more than $ 57,000 – could this cryptocurrency created in 2008 be becoming the currency of tomorrow? ?
In the beginning was the block: a cryptocurrency is “a virtual currency which is based on a computer protocol of encrypted and decentralized transactions, called blockchain or chain of blocks”, according to the National Institute of consumption. It is therefore a new type of currency, created entirely by computer technology, which is neither guaranteed nor regulated by a central bank (like the euro is by the ECB, or the dollar by the Fed).
8,500 cryptocurrencies have been created, and about sixty of them “weigh”at least a billion dollars, as recalled The Express. Experts in the field know ethereum, dogecoin, ripple or litecoin, but the best known – and the most used – is undoubtedly bitcoin, which is now regularly in the headlines of the economic news.
On October 31, 2008, a certain Satoshi Nakamoto published a message intended for “cypherpunks” (computer enthusiasts using cryptography to protect privacy) in which he announced that he was working “on a new electronic money system entirely peer-to-peer. -pair, without trusted third party ”, accompanied by a link to the white paper, a document summarizingthe functioning of what would now be bitcoin, as recalled Capital.
The first block of the Bitcoin blockchain was created on January 3, 2009, and nine months later, a value was given to bitcoin for the first time: $ 0.001, which corresponded to the cost of the electricity needed to create a bitcoin by a computer, still according to Capital. In February 2011, bitcoin hit $ 1, then rose steadily until it hit $ 19,891 on December 17, 2017. Then followed the big tumble of January 2018, when bitcoin’s price was divided by three – while still remaining 2.5 times higher than a year earlier.
Bitcoin will then continue to fluctuate – without exceeding the $ 12,000 rating, however – until another collapse, to $ 4,939, on March 16, 2020. This is when the crazy boom in bitcoin begins, which brought it its notoriety with the general public.
While the whole world is still grappling with the Covid-19 pandemic, bitcoin is not experiencing the crisis. Cryptocurrency began its wild ascent when the world was confined, before stealing from record to record: bitcoin reached $ 20,000 on December 16, 2020, $ 30,000 on January 2, 2021, and $ 50,000 on February 16 . A growing success galvanized by the interest of large banks and certain companies like Tesla. Investors no longer see bitcoin only as an object of speculation, but also as a real currency and as a long-term investment.
Many people discovered the existence of bitcoin on June 15, 2011, when the NGO WikiLeaks announced on Twitter that it would now accept donations in bitcoins, after Visa, MasterCard and PayPal suspended payment authorizations to the website of the organization founded by Julian Assange. Nine years later, bitcoin is no longer just virtual, and now benefits from being anchored in the “real world”: in addition to the appearance of bitcoin ATMs (“ATM bitcoins”), cryptocurrency is becoming a means of payment usable on a daily basis – with a certainly reduced number of companies: according to Coinmap, more than 20,000 establishments around the world accept payments in bitcoins (via a mobile application and a QR code for “physical” businesses) . In France for example, the home meal delivery man Just Eat has been offering payment by bitcoin since September 2020.
On February 8, electric vehicle maker Tesla announced that it is considering accepting bitcoin as a “means of payment for [ses] products in the near future ”, combined with the purchase by the automobile company of 1.5 billion dollars of bitcoins, made take 13% in the cryptocurrency, which reached a peak of 43,725 dollars. This is not the first time that bitcoin has received a “boost” from Elon Musk, the boss of Tesla and SpaceX regularly commenting on the cryptocurrency universe. Thus, on January 29, the price of bitcoin exploded by 18% in an hour after the then richest man in the world added a reference to the cryptocurrency in the biography of his Twitter account, followed by nearly 44 million subscribers. Elon Musk (who is also a staunch supporter of dogecoin) however claimed in a tweet a few weeks earlier – that is, just as Tesla was in the process of buying $ 1.5 billion worth of bitcoin, as reminded Le Figaro– that cryptocurrency was “almost as rotten” as fiat money.
Bitcoin also owes its rise to the attention it now receives from large companies and large Wall Street hedge funds – such as Fidelity, Stone Ridge, JP Morgan or BlackRock – which store this cryptocurrency for several million dollars. Billionaire and hedge fund manager Paul Tudor has announced that he will hold 2% of his fortune in bitcoins, a safe haven that he believes will help fight against the imminent devaluation of “traditional” currencies, like gold. Confidence in cryptocurrency is therefore growing, as evidenced by the announcement on February 12, 2021 by Twitter founder Jack Dorsey of the creation with rapper Jay-Z of a foundation to finance the development of bitcoin as an “internet currency “.
JAY Z/@S_C_ and I are giving 500 BTC to a new endowment named ₿trust to fund #Bitcoin development, initially focused on teams in Africa & India. It’ll be set up as a blind irrevocable trust, taking zero direction from us. We need 3 board members to start: https://t.co/L4mRBryMJe
– jack (@jack) February 12, 2021
Instability, risks and limits
This phase of bitcoin’s credibility has led a number of experts to consider that its current surge is very different from that of 2017 – mainly due to the action of particular speculators – and that it could well be lasting. The Californian cryptocurrency exchange Kraken, for example, obtained a banking license in the US state of Wyoming; a great first that could open the door to mass adoption. In Argentina and Venezuela, where inflation of national currencies is raging, part of the population has turned to bitcoin in order to preserve their savings, according to Le Figaro. If bitcoin gradually gains the trust of institutions and individuals, what obstacles could prevent it from establishing itself as the gold of the 21st century?
The 14% of French people who would like to invest in cryptocurrencies (according to a survey carried out by Ifop for the Cointribune site) should not forget that “the custody of crypto-assets does not offer any protection in terms of security of assets” because it may be subject to computer hacking, according to the French Ministry of the Economy. Not to mention the bitcoins “lost” by their holders due to a forgotten password or a misplaced storage device …
The Autorité des marchés financiers (AMF) further indicates that “investing in crypto-assets is risky and [que] many crooks operate on the internet ”.
Given that they can be anonymous (when not purchased through a regulated platform) or anonymized, cryptocurrencies can also be used for money laundering or to finance terrorism and other criminal activities. A view shared by former US Central Bank President Janet Yellen, who said in an interview on February 23 at New York Times not to think that bitcoin can be “widely used as a transaction mechanism as it is often used […] for illicit financing ”.
The significant fluctuations in bitcoin are also a reminder that it is a very volatile currency – which allows for quick gains when it rises, but equally searing losses when it falls. Experts also claim that the euphoria that has surrounded cryptocurrency will inevitably see a relatively large correction. It remains to be seen when this will take place: this summer, after bitcoin has completed its insane rise? Or has it already started, with the falls observed on February 22 and 23?
In two days, bitcoin has indeed fallen from $ 57,489 to $ 47,899, a drop of 16.7%. Ethereum – the second most important cryptocurrency – has followed a comparable course. A correction that came from strong sales by investors in Asia, and which coincided with another statement by Janet Yellen, now Treasury secretary in the Biden administration, that bitcoin “is a highly speculative asset.” “I am worried about the potential losses that investors could suffer,” she added.
This fluctuation in the price of bitcoin was once again commented on by Elon Musk, who implied in these terms that the prices of bitcoin and ethereum were too high: “That said, bitcoin and ethereum have looks high, lol. ” This drop in bitcoin cost the entrepreneur $ 15 billion, according to Business Insider, allowing Jeff Bezos to once again become the richest man in the world.
However, by February 24, bitcoin had already recovered 7% to hit $ 50,610 while ethereum was up 15%. As a study by Sha Wang and Jean-Philippe Vergne affirms, the price of cryptocurrencies could well be, in the long term, more sensitive to technological developments concerning the blockchain than to media buzz.