Bitcoin was launched in 2009 and is still relatively young as a global technology, network, and currency (BTC). Many misconceptions have arisen and a lot of incorrect information about Bitcoin continues to be circulated by sources which have not adequately studied Bitcoin (BTC).
Bubbles are economic cycles characterized by unsustainable rises in market value. They eventually pop when investors realize prices are much higher than an asset’s fundamental value. Bitcoin is occasionally compared to an infamous early speculative bubble: the 17th century Dutch “tulip mania.” In 1637, speculators caused prices for some tulip varieties to surge 26x. The bubble lasted six months, crashed, and never recovered. This is not what happens with Bitcoin.
Since it was launched in 2009, Bitcoin has gone through multiple price cycles. In each cycle it has reached new all time highs followed by significant price corrections. In every single case, following these price corrections, Bitcoin has recovered and continued on to reach new all time highs. This is not what happens in bubbles, like the tulip mania bubble.
Oscillations in Bitcoin’s price form a pattern typical of young markets where they are gradually growing in size and market cap. Bitcoin is just 15 years old and its global adoption rate continues to grow quite quickly. As this adoption rate grows, Bitcoin's market cap grows and its price volatility gradually diminishes. Bitcoin's core features of scarcity, deflationary supply, decentralization, permissionless access, and a transparent public ledger continue to be the bedrock of its value and why it continues to achieve new highs over time relative to other currencies and assets. So how fast is Bitcoin being adopted? The adoption rate for Bitcoin has outpaced the global adoption rate of the Internet. [1] [2] [3]
In recent years, Bitcoin has become increasingly popular as an inflation-resistant store of value, much like gold was for centuries. That's why some refer to Bitcoin as “digital gold”. A growing number of companies (Tesla, Square, MicroStrategy, Tahinis) have bought millions or even billions of dollars worth of Bitcoin as a means to better manage their assets. And, the use of BTC as a currency for day-to-day transactions continues to grow around the world.
While Bitcoin might not be backed by a physical asset like gold, neither is the Canadian dollar or virtually any other modern fiat currency. Bitcoin is hard-coded to be scarce, decentralized, and to have a deflationary supply. These help make it resistant to inflation, which is what happens with fiat currencies when large quantities are created, thus diluting the existing supply.
There will only ever be 21 million BTC, the currency issued and transacted over the Bitcoin network. This scarcity is a major driver of its value. Not only is the supply capped, but the amount of new Bitcoin being mined is declining over time in a predictable way. Roughly every four years, in an event called a “halving,” block rewards paid to miners in the network are cut in half. This happens at every 210,000 blocks that are mined. The most recent halving occurred at block 840,000 on April 19, 2024. This feature helps ensure that the new supply of BTC is always reducing which, by the basic economic principle of scarcity, has worked to keep the price of Bitcoin broadly trending upwards over the long-term — from less than a penny in 2009 to more than CAD $80,000 as of April 2024.
Bitcoin also derives value from the work which computers on the Bitcoin network contribute via a process called "hashing" or "mining". Powerful computers all over the world supply a vast amount of processing power towards the work of attempting to earn the next block and for validating and securing transactions.
Critics like to claim that Bitcoin isn’t useful in the real world — or if it does have a use, it’s mostly useful for illicit activity. Neither of those statements is true. Bitcoin has a long history as a means of making payments to anyone in the world, all without a bank or payment processor in the middle.
Bitcoin is increasingly being used as a gold-like hedge against inflation by major institutional investors. Much like gold, Bitcoin is scarce (there will never be more than 21 million Bitcoin). Gold, of course, is heavy, bulky, and difficult to transport and store. Bitcoin, on the other hand, can be sent digitally as easily as sending an email.
Bitcoin is being increasingly being used for remittances around the world, as a censorship-resistant currency for people living in authoritarian regimes, and a currency for daily life in towns and countries around the world. In fact, a fast growing number of jurisdictions around the world, located on all continents, are becoming local Bitcoin circular economies.
Some people look at the price of Bitcoin (BTC) and its significant rise over time and think they have missed the boat. "It's too late, I should have bought back when...". This is understandable given Bitcoin's tremendous growth. However, this is to confuse Bitcoin's value with its current price.
Bitcoin's value is a function of its combined core features and its global adoption rate. Its core features include its scarcity, its decentralization, its censorship-resistance, its global portability, and the fact that it is a digital asset that is truly accessible and used worldwide. Bitcoin's global adoption rate since it was launched in 2009 has outpaced the adoption rate of the Internet. Despite all this, we are still very early in Bitcoin's global adoption. So, the current price of BTC is still just a very early marker of adoption and use. As global adoption and use continues, this price marker will continue to grow at similar rates too,
It's important to remember that at every single milestone over the past 15 years, people have thought "I'm too late". At $10, at $100, at $1000, at $10,000 and again as we approach a BTC price of $100,000 people have looked backward and thought to themselves "I'm too late", only to watch the price of Bitcoin continue to reach new highs over time. So, as the price of Bitcoin nears CAD $100,000 remember that you will look back at this as an early stage once the price reaches $500,000 or $1,000,000.
Another common error is for people to look at the price of 1.0 BTC and compare this to other crypto tokens that are much cheaper, mistakenly thinking that it will be easier to make profit by buying the cheaper crypto. The error in judgment is to assume those other crypto will experience similar price increases over time as Bitcoin, which history has proven to be false. Don't get caught in the trap of "unit bias", which is a way of saying that we often mistakenly believe that something with a lower price has greater potential to increase in price.
The best course of action is to study Bitcoin, and to buy and save Bitcoin over a longer period of time. Let time, global adoption, and the network effect work their magic!
Like any form of money, some Bitcoin will be used for illicit activity. However, research shows that an extremely small portion of transactions involving Bitcoin are for illicit activity. In fact, a 2021 global report found that less than 2% of Bitcoin transaction volume in 2019 was related to criminal enterprise and that this figure had fallen below 0.34% by 2020.
Since all Bitcoin transactions happen on an open blockchain, which is a transparent public ledger, it’s actually easier for authorities to track illicit activity using Bitcoin than it is using cash and traditional financial institutions. Cash transactions (the U.S. dollar in particular) and traditional financial institutions like large commercial banks remain the dominant vehicles worldwide for money laundering, embezzlement, and other criminal activity. In fact, since 2000, large commercial banks have been fined over $388 billion for aiding in money laundering, securities abuses, consumer protection abuses and other infractions. [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]
Bitcoin was the first really successful digital money. And while new cryptocurrencies have long promised to overtake Bitcoin via new features or other promised advantages, none have come even close. Though thousands of other cryptocurrencies have been created over the past decade, Bitcoin has always been and remains by far the most valuable cryptocurrency by market cap, by adoption rate, and by use cases -- by a significant margin.
Bitcoin have benefitted from the “first-mover” advantage along with the purity of its mission as a decentralized and open-source network, software, and currency.
The Bitcoin network has never been hacked. Its open-source code has been scrutinized by countless security experts and computer scientists. Bitcoin was also the first digital currency to solve the double-spend problem, making “trustless” peer-to-peer currencies a reality.
Bitcoin hashing machines and data centres (often referred to as miners) engage in an energy-intensive process. But determining the environmental impact is hard. For one thing, all aspects of the digital economy require energy. Consider the entire global banking system, and all of the energy required to process transactions with our current fiat currencies like the Canadian dollar, US dollar, Euro and others. This includes all of the banking transactions, and powering office buildings, ATMs, local branches, and much more. This doesn't even begin to touch on the fact that our current fiat currencies and the global financial system which they drive are inflationary and spur on conspicuous consumption. Think of all the landfills full of cheap plastic goods -- things we really don't need.
Abundant research has concluded that Bitcoin is much more efficient than traditional banking and gold mining on a global scale and it also has numerous environmental advantages. This includes the ability of Bitcoin data centres to locate at landfills, farms, and oil wells to capture escaped methane and flare gas, turning them into electricity and preventing them from escaping into the atmosphere.
Upward of 60% of Bitcoin mining is powered by renewable-energy sources (including wind, hydro, and solar) and the economic incentives inherent to Bitcoin mining are helping drive sustainable energy innovation, as miners constantly seek to increase profits by lowering their electricity costs in a world where renewable energy is fast becoming the cheapest option. In the process, Bitcoin mining is also helping to stabilize electrical grids and to accelerate electrification of our societies, bringing energy to parts of the world that still don't have electricity, and reducing dependence on hydrocarbons for energy. [1] [2] [3] [4]
Find more research and resources on Bitcoin's positive impact in our "Why Bitcoin?" page.
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