Bitcoin (BTC) was the first cryptocurrency created and is now the most valuable and well known.
While the idea of cryptocurrency has been around for over 40 years, Bitcoin made it a reality in 2009 and its 15-year trading history has been an exhilarating ride. Fueled by increasing interest from younger investors, Bitcoin continues to be one of the most hotly debated global financial topics.
Bitcoin Timeline
Some key moments in the cryptocurrency’s timeline include:
— 1983: American cryptographer David Chaum, known as the “godfather of cryptocurrency,” published a concept for anonymous electronic money, which he named eCash. He founded Digicash in 1989 to launch his concept through a single bank, but failed to gain significant user adoption. The test bank was acquired by a large credit card issuer, leading to the dissolution of Digicash in 1998.
— 2008: A white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System was published by an unknown person or persons going by the name Satoshi Nakamoto.
— 2009: Bitcoin was created, becoming the first truly decentralized cryptocurrency.
— 2013: Forbes recognized Bitcoin as the year’s best investment.
— 2014: Bloomberg proclaimed Bitcoin as the year’s worst investment.
— October 2021: The Securities and Exchange Commission approved ProShares Bitcoin Strategy (ticker: BITO), the first U.S. Bitcoin futures exchange-traded fund.
— November 2022: FTX, the leading cryptocurrency exchange by trading volume, declared bankruptcy.
— January 2024: The Securities and Exchange Commission approved the first 11 spot Bitcoin ETFs.
— July 2024: The SEC gave final approval for spot Ether ETFs to start trading.
How Bitcoin Started
Bitcoin was launched in January 2009 by a computer programmer — or group of programmers — using the pseudonym Satoshi Nakamoto. Nakamoto’s true identity has never been verified.
In a 2008 white paper, Bitcoin’s enigmatic creator introduced the blockchain system, the backbone of the cryptocurrency market. A blockchain is a digital ledger of transactions replicated and distributed across a network of computer systems, securing the information. It allows any person with internet access to make financial transactions independent of banks, financial firms and government.
Bitcoin Core Concepts
Block. A block is a group of Bitcoin transactions over a certain period. Transactions are verified by Bitcoin “miners,” who are financially rewarded for their work with newly created BTC.
Bitcoin units. Each Bitcoin is divisible to eight decimal places. A millibitcoin (mBTC) is 1/1,000th of a Bitcoin. The smallest unit is a satoshi (sat), which is 1/100,000,000th of a Bitcoin.
Transaction. A computer directive styled as “payer X sends Y Bitcoin to receiver Z.”
Blockchain. Each transaction creates an unbroken link in the chain, forming a transparent and public ledger that enables Bitcoin’s existence and usability. All transaction blocks are linked to previous blocks, giving rise to the term “blockchain.”
Mining. Independent individuals or groups performing complex and costly computer calculations to create a block.
Block hash.Mining activities include a record-keeping service ensuring the blockchain remains consistent, complete and unalterable. The hashes validate available Bitcoin and provide a uniform mining reward.
Blockchain address. A sequence of 25 to 34 alphanumeric characters used to receive Bitcoin. Although the blockchain is public, addresses conceal personally identifiable information, providing anonymity. While cryptocurrency exchanges may be required to collect personal data, each transaction can use a different Bitcoin address to enhance privacy.
Wallet. To exchange Bitcoin (as opposed to storing it on an exchange), an individual or entity must create a digital collection of credentials, known as a wallet, to facilitate transactions.
— Full clients. A wallet that contains a complete copy of the entire blockchain, making it the safest form of storage besides offline or “cold storage.” However, it requires a significant amount of digital space.
— Lightweight clients. A wallet that only holds a partial version of the blockchain, allowing it to be used on portable devices like smartphones. Since it does not include the entire blockchain, users must trust full wallet intermediaries for verification.
Keys. These are the private credentials stored in a wallet. Similar to a safe-deposit box, access to the value within a wallet requires a private, alphanumeric key. If a party loses their key, the Bitcoin becomes inaccessible and effectively worthless. According to Chainalysis, a blockchain analytics firm, roughly 20% of Bitcoins have been lost due to misplaced private keys.
— Public keys. This is the technology used to encrypt and decrypt transactions. It is “one way,” allowing transactions to be unlocked but not reversed. This key enables the blockchain to be uninterrupted.
— Private keys. This is the passcode that transacting parties initiate so that the transaction is unique to themselves. To spend Bitcoin, one must know their own private key and digitally sign the transaction. The party’s signature is verified by the public key without revealing the private key. If a private key is exposed in a security breach, the Bitcoin associated with it can be stolen. In 2022, cryptocurrency investors suffered a record loss of $3.8 billion to hackers.
Bitcoin Adoption and Controversy
Bitcoin supporters point out that an increasing number of institutions, countries and platforms are accepting the digital currency. In the U.S., its primary value is as an investment.
Proponents remain hopeful that Bitcoin could eventually become a global reserve currency, and the U.S. is exploring this potential at the federal level. On March 9, 2022, President Joe Biden signed Executive Order #14067 to examine the regulatory and oversight needs for digital assets and to consider the development of a U.S. Central Bank Digital Currency (CBDC), a digital version of the dollar. The EO also calls for the U.S. to take a leadership role in promoting financial stability, data privacy and human rights in international digital initiatives. This initiative has stalled due to a number of states, led by Florida, enacting bans on state payments using CBDC, citing privacy concerns.
While some countries (notably China, India and Saudi Arabia), have banned cryptocurrency mining and trading, many others are fully embracing it:
— Cryptocurrency has been used to fund both sides of the Russia-Ukraine conflict. Crypto is prized due to its decentralized nature, where quick transactions are useful to get humanitarian aid and military support funding into conflict zones. At the start of the Russian invasion, Ukraine raised over $56 million in total value within the first month. Bitcoin has overtaken the Russian ruble, due to its perceived value as a safe haven. The Bitcoin community chafed at Ukraine’s attempt to freeze Russian wallets. While publicly defiant, many of the exchanges are privately honoring the sanctions.
— El Salvador, battling severe economic issues and a weak national economy, adopted Bitcoin as legal tender in 2021, becoming the first country to do so. While the start was slow, President Nayib Bukele has become very popular for his pro-crypto stance, among other sweeping initiatives.
— Iran has found Bitcoin to be an effective method to bypass U.S. financial sanctions. Leveraging its abundant natural resources, Iran easily pivoted from impacted oil and gas operations to producing hydroelectric power for Bitcoin mining. The flow of funds to Hamas was linked to $165 million in crypto transactions believed to have funded the surprise attack on Israel on Oct. 7, 2023. In May 2024, Sen. Elizabeth Warren formally raised the issue with the federal Defense and Treasury departments, citing the continuing threat to U.S. national security.
Bitcoin had faced heavy scrutiny for significant electricity consumption and impact on climate change. The University of Cambridge publishes the Cambridge Bitcoin Electricity Consumption Index (CBECI), providing estimates of the greenhouse gas emissions associated with Bitcoin. The CBECI found that improvements in Bitcoin mining hardware have reduced energy demands by 15 terawatt hours (TWh), and KPMG reported in August 2023 that Bitcoin had received a positive ESG rating. The cryptocurrency community cheered, as it has an eye on ESG investors. Crypto enthusiasts believe that if just 1% of managed assets were diverted to Bitcoin, that could provide the catalyst for another bull run.
The rapid rise and subsequent collapse of crypto exchange FTX marked one of Bitcoin’s most dramatic chapters. Led by Sam Bankman-Fried, also known as SBF, FTX operated alongside Alameda Research, another company founded by SBF and managed by Caroline Ellison. FTX expanded aggressively through high-profile acquisitions and splashy marketing campaigns. At its peak, SBF was ranked as the 41st-richest person on the Forbes 400 list.
In November 2022, CoinDesk published an article detailing FTX’s precarious financial situation, lack of accounting oversight and potential criminal use of customer assets. Panicked customers created an $8 billion liquidity shortfall. Coupled with the collapse of the FTT digital token, crucial to Alameda Research’s operations, FTX ultimately filed for bankruptcy.
In December 2022, SBF was arrested and indicted by the U.S. District Court on multiple criminal charges, including money laundering, wire fraud, campaign finance violations and securities fraud. In November 2023, SBF was convicted of seven federal counts of fraud and conspiracy. On March 28, 2024, he was sentenced to 25 years in federal prison and ordered to forfeit $11.02 billion.
[READ: Forex Trading for Beginners: How to Trade Currency and Avoid Forex Scams]
Bitcoin Price Trajectory
Nakamoto initially capped the Bitcoin supply at 21 million coins. As of July 22, 2024, there were 19,771,912.5 BTC in circulation, leaving only 1,278,087.5 BTC left to be mined.
One year after Nakamoto rolled out Bitcoin in 2009, he became a digital ghost. His decentralized vision meant that there was no central authority, server, storage or administrator. The network operated on a peer-to-peer basis, with the blockchain distributed across all participants to legitimize and verify transactions. This uncertainty around Nakamoto’s absence caused Bitcoin’s price to drop.
The first real-world Bitcoin transaction occurred on May 22, 2010, now celebrated by Bitcoin enthusiasts as Bitcoin Pizza Day. Laszlo Hanyecz spent 10,000 BTC to have two Papa John’s pizzas delivered, valued at approximately $25. At Bitcoin’s peak price, the two pizzas would have cost north of $689 million.
Bitcoin thrives on volatility, a phenomenon partly explained by the Gartner Hype Cycle, which is common among new and innovative technologies. This cycle includes five stages: the innovation trigger, peak of inflated expectations, trough of disillusionment, slope of enlightenment and plateau of productivity. Many people have gained and lost substantial fortunes with Bitcoin, leading eight Nobel Prize winners in economic sciences to compare it to the oft-cited Dutch tulip mania in the 1600s. Bitcoin supporters argue that despite several crashes, Bitcoin has consistently rebounded to its previous peak, unlike other bubbles that have failed to recover.
The economy has significantly impacted Bitcoin pricing. Sharp declines in Bitcoin’s value occurred when the last speculative surge was curtailed by interest rate hikes in 2022. During the battle against inflation, interest rates climbed to a federal funds rate of 5.25% to 5.5%, the highest in 22 years. Investor appetite for risk vanished and liquidity became a major issue for exchanges and hedge funds. The FTX collapse worsened the liquidity crisis until remaining assets were frozen within FTX. Many smaller exchanges buckled under the liquidity crunch.
Bitcoin’s value dropped by more than 70%, from its all-time high of $68,789 in November 2021 to around $16,000 by December 2022. By late 2023, Bitcoin managed to break through resistance barriers, reaching the $30,000 to $35,000 range.
Persistent inflation continues to be a headwind. Although interest rates have not yet returned to their previous lows, the market has responded positively to Federal Reserve actions.
In January 2024, the SEC approved 11 Bitcoin ETFs. Ric Edelman, a leading financial author and advocate for cryptocurrencies, said the SEC’s approval would drive the financial advisory community to propel forward newly approved spot Bitcoin ETFs, potentially driving the price up to triple its current value. As more firms express interest in working with crypto assets, industry regulators will refine their expectations for handling and marketing these alternative assets to the public.
On March 5, Bitcoin reclaimed its previous all-time high of $69,000, marking a remarkable recovery of over 300% from the “crypto winter” of 2022. The total cryptocurrency market capitalization also exceeded $2 trillion for the first time since early 2022. On March 14, the highest intraday price was $73,750.07. As of July 22, 2024, the price was $67,577.77.
On April 19, Bitcoin experienced a significant event known as a halving. This unique deflationary mechanism, occurring roughly every four years, reduces the rate at which new coins are created, enhancing Bitcoin’s scarcity. This halving reduced the mining reward from 6.25 Bitcoin per block to 3.125 BTC. Historically, halvings correlate with rising BTC prices, although past performance does not guarantee future results. The next halving is expected in 2028, and the process will continue until 2040, when the total Bitcoin supply reaches its cap of 21 million. At that point, the mining reward will drop to just one satoshi, the smallest unit of Bitcoin, which cannot be further divided.
On July 23, BlackRock Inc. (BLK), VanEck and six additional firms began trading spot Ether ETFs on three different exchanges.
Anticipating the Future of Bitcoin
The SEC’s dual ETF announcements have broadened cryptocurrency appeal to investors. Edelman has projected that the price of Bitcoin could reach $150,000 in the next few years, while others have predicted that surging demand for limited supplies could propel Bitcoin to $500,000 within five years.
However, the public response has been less enthusiastic than anticipated. Massive inflows of assets under management, or AUM, have not materialized at the pace predicted. Instead, the market is seeing more gradual adoption, leaning into institutional giants like JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) for key support capabilities and retail investor stability.
Bitcoin enjoys a strong narrative that it is “digital gold,” a refuge in turbulent times. This belief was reinforced on July 19, when CrowdStrike Holdings Inc. (CRWD), a U.S. cybersecurity firm, issued a flawed Microsoft Corp. (MSFT) computer software update, resulting in a massive outage worldwide. Due to the centralized nature of the global economy, this malfunction significantly disrupted multiple sectors, including traditional finance. Bitcoin, as a decentralized technology, continued operations without a single glitch and surged 4% that day.
Satoshi Nakamoto’s personal holdings total 1,125,150 BTC, currently valued at approximately $76 billion. This great wealth would place Nakamoto as the 21st-richest person in the world, between the eldest and youngest sons of Walmart Inc. (WMT) founder Sam Walton. Significant wealth concentrated in a speculative investment can be problematic both for the living as well as their heirs. As time continues to pass, any estate planning (or lack thereof) could lead to unexpected developments.
Regulatory activity had been on the rise. Warren had also requested that SEC Chairman Gary Gensler respond by July 28, 2024, with a written statement on the agency’s regulatory authority over cryptocurrency exchanges and their users. On the same day, the U.S. Supreme Court unexpectedly ruled against the Chevron doctrine, a 40-year precedent on the power of federal agencies, including the SEC. Until these powers are more clearly articulated, new crypto rules are unlikely.
Tesla Inc. (TSLA) CEO Elon Musk has created a significant buzz in the crypto community by changing his X profile picture to one with laser eyes, a designator of the 2021 Bitcoin bull run. Musk has hinted at a surprise personal appearance at the Bitcoin 2024 conference being held in Nashville, Tennessee, from July 25 to 27. Musk has further instigated rumors that Donald Trump will accompany him to the conference in order to announce a U.S. Bitcoin strategic reserve. Bitcoin surged 1,900% during Trump’s first presidential term, and the U.S. government already holds 212,000 BTC worth around $15 billion. With this backdrop, a reveal of this nature is speculated to cause an “instant moon,” or a rapid movement in price.
Clearly, at just 15 years old, Bitcoin’s story is far from over.
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The History of Bitcoin originally appeared on usnews.com
Update 07/24/24: This story was previously published at an earlier date and has been updated with new information.
