In our last post, we left off right after the Mt. Gox fiasco. The bitcoin community was in disarray, and more than a few pundits predicted that this was finally the end.
They might have known better. Over its history, bitcoin has been declared dead 400+ times. Not too shabby for a currency that’s currently only 12 years old.
The Mt. Gox hack did little to dissuade people from adopting Bitcoin. In 2015, an estimated 160,000 merchants were using bitcoin. In 2016 the number of bitcoin ATMs jumped to 700+. A major hurdle was cleared when the Cabinet of Japan recognized virtual currencies as having a function similar to real money.
The ICO (initial coin offering) craze hit in 2017. The crypto economy was suddenly awash in capital. A speculative bubble emerged around Ethereum-based cryptocurrency projects. Instead of turning to traditional methods of fundraising like venture capital or banks, startups would create a cryptocurrency and sell it to raise money. Founders crowdsourced enormous amounts of money by selling tokens to investors. Some of the best-known ICOs raked in hundreds of millions, if not billions of dollars.
The ICO is a take on the traditional IPO, or initial public offering, where shares of a company are sold to investors. Unlike IPOs, which are subject to stringent regulation, ICOs were essentially free-for-alls, and founders could create money out of thin air.
The tokens generally had some proposed use, and investors hoped that a token bought for pennies would skyrocket in price, just as Bitcoin had.
While many founders were committed to their projects, plenty engaged in unethical behavior. One common strategy was the “pump and dump”, where founders and advocates would talk a token up until its price rose, and then dump their holdings, making off with a fortune while the price of the token crashed. Bitcoin lost its dominance in the crypto market as altcoins gained traction.
As interest in altcoins increased, the price of bitcoin skyrocketed, reaching just under $19,800 in December. The good times were not to last, and when the ICO bubble burst it would take bitcoin down with it.
Bitcoin prices plummeted in 2018 following a total ban on bitcoin trading in China. As the dust settled on the ICO bubble, countries moved to prevent financial crimes and further market manipulation by regulating cryptocurrencies. A staggering number of ICO projects failed, with nearly half of all ICOs launched in 2017 going under by February 2018. Only a few ICOs retained any value.
2018 was a rough year for the crypto economy. Plenty of people had been burned in the bubble referred to one magazine as the Widowmaker. The SEC forced some ICO projects to reimburse investors, but many who invested in failed projects never got their money back. Bitcoin’s price plummeted, going below $4,000 at one point.
Against this background of disillusionment, payment provider Stripe removed support for bitcoin due to problems with transaction times.
Things started looking up in 2019 when the Lightning network was installed, improving the speed of bitcoin transactions. 2019 was also the year of regulation, with financial agencies worldwide taking strong measures to control cryptocurrencies. Facebook attempted to launch its own cryptocurrency, Libra. The attempt failed due to regulatory pressure, but it did signal a renewed interest in cryptocurrencies by established corporate bodies.
The SEC continued to shoot down bitcoin Exchange Traded Funds (ETFs). This was due in part to the fund’s perceived failures to meet requirements around market manipulation. Funds also proved reluctant to comply with SEC-mandated surveillance measures. The SEC also cracked down on ICOs, suing several prominent projects. Exchanges, in turn, began pulling out of markets worldwide due to fear of regulatory crackdowns.
Just three years after the ICO craze, the price of bitcoin skyrocketed again. Due to a price collapse where bitcoin halved in value, combined with anxieties about the Covid-19 pandemic, buyers rushed to purchase Bitcoin. Several large investors bought millions in Bitcoin, and payment processor PayPal announced Bitcoin functionality for US users. The price of Bitcoin skyrocketed, and by April 2021 the price hit $63,000.
The price dropped down to $30,000 in relatively short order. Conversations about bitcoin’s environmental impact also intensified, with many publicly disavowing the cryptocurrency due to its carbon footprint.
Bitcoin reached a historic milestone when the Legislative Assembly of El Salvador voted to make Bitcoin legal tender. It’s difficult to overstate the impact of the El Salvador decision. There’s no knowing where Bitcoin is headed in the future, but it’s definitely going to be interesting.
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