From disbelief to mainstream adoption: How Bitcoin won the race
Today, Bitcoin is an asset known across generations, professions, and countries. Recently, the crypto market surpassed the $2 trillion mark, with Bitcoin topping $1.1 trillion amid the latest price rise.
Moreover, companies today embrace Bitcoin and other cryptocurrencies as a store of value to their treasuries and accept it as payment, while traditional banks and financial institutions offer investment vehicles. Bitcoin built an entirely new industry, expanding into Decentralised Finance, Non-Fungible Tokens (NFTs), Decentralised Organisations (DAOs), and much more. However, that wasn’t always the case.
A strong goal of financial revolution from the beginning
Bitcoin was created in the aftermath of the 2008 financial crisis by the now-notorious Satoshi Nakamoto, whose identity remains anonymous.
Bitcoin’s goal was to directly tackle the power and monopolisation of banks by eliminating intermediaries when parties want to transact with each other. Bitcoin’s decentralised peer-to-peer network meant that no central entity controlled it, giving total freedom to people or organisations to freely transact in the network and exchange this new digital currency.
The release of the Bitcoin whitepaper set the foundation for the digital transformation going on today. Naturally, incumbents in the financial sector, legacy investors, and traditional financial institutions are not prone to radical innovations and have dismissed Bitcoin for many years since its launch.
Throughout the years, many bashed Bitcoin with less-informed arguments about its network, its architectural design, features, and use-cases. Critics’ initial argument concerned Bitcoin’s volatility as price swings are frequent. Additionally, issues like security and legality rose to the top of discussions, while many have claimed its death as an alternative asset.
Bitcoin before and after — headlines. Source: Reddit
How has Bitcoin survived? Bitcoin’s unique use-cases amid a digital society
With native generations coming of age and an increasing society converting to the advantages of digitalisation, Bitcoin’s emergence as a new financial system was inevitable.
Bitcoin was the first cryptocurrency in the market and remained the leader of the space since its inception. At its core, Bitcoin is a revolutionary technology based on Blockchain technology where you can transfer freely, anonymously, with high security, and with no possible intervention of central entities in its network (decentralised), appealing to mass audiences.
Community of early innovators and developers
Bitcoin has a deeply involved decentralised team of developers to guarantee the continuous progress of the network, with the deployment of innovations and increased efficiency. Its consensus mechanism, based on majority votes, promotes discussion and aligns incentives for developers to make meaningful changes in the network.
One of Bitcoin’s main assets became its outspoken community, starting with more people from the tech and engineering spaces, but spread out, attracting outspoken personalities about the virtues of digital currencies (e.g., sports personalities, entrepreneurs including MicroStrategy’s Michael Saylor). The network effects generated with its increased adoption and use remain its main sources of value and catalyst for future market dominance.
Proved market position and streams of adoption
Bitcoin has become more of a store of value than necessarily a payment system. However, the two interconnect as the easiness and efficiency of transacting Bitcoin is key for new players adopting it.
Bitcoin’s fixed maximum supply, halving mechanism (cutting rewards for miners every four years), and inflation-adjusted monetary policy make it a central asset of choice for the future. Amid a new wave of quantitative easing in Europe and stimulus checks in the US, investors start to worry about inflation, positioning Bitcoin as the go-to reserve asset, hence its association to “digital gold.”
As a result, there are a wide number of companies accepting Bitcoin and other digital currencies as payment options for their products, making it ubiquitous while wanting to invest directly in the asset as a long-term value appreciation play.
Public Companies with largest Bitcoin holdings. Source: Fortune
For example, publicly traded companies such as Tesla or MicroStrategy acquired more than $3 billion worth of Bitcoin to their balance sheet, while other companies worldwide follow similar strategies. From Japanese app providers (Nexon) to tech companies like Square buying Bitcoin in the hundreds of millions range, no one wants to miss the boat. At the same time, banks and traditional financial institutions rushed to offer Bitcoin-related services and investment products to their clients to meet customer demands and excitement around the space.
Bitcoin’s latest bull-run since late 2020 was bolstered by an awareness of institutions, followed by the continuous retail attention to cryptocurrencies, leading Bitcoin to cross the chasm into a later stage of its market maturity. As Bitcoin continues to prosper from a fundamental perspective, more companies and institutions are prone to adopt, risking its market livelihood if ignoring this worldwide trend.
Cryptocurrencies are generally not regulated and investors do not have access to recourse or compensation schemes such as, for example, in the UK, the Financial Ombudsman Service or the Financial Services Compensation Scheme. Investing in cryptocurrencies can be high risk and investors should carefully evaluate their appetite for risk and their understanding of trading cryptocurrencies prior to entering into a transaction.