Record Bitcoin Price Will Be Good News For Some, But It Could End Up Disastrous For Others Economic news

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When Bitcoin was launched in January 2009, it was worth a few cents.

One man even tried to auction 10,000 Bitcoins for $ 50 in 2010 – only to be told the price was way too expensive.

Fast forward so far, and this crypto haul would be worth around $ 650million (£ 470million).

Image: Bitcoin price since the start of the year

Bitcoin’s latest rise to $ 67,000 has baffled billionaires and scared central banks.

For most of its existence, cryptocurrency has been described as a bubble ready to burst – but so far every steep fall has been accompanied by an equally steep recovery.

Although the notoriety of this digital asset has increased in recent years, it remains poorly understood.

The Financial Conduct Authority revealed in June that the number of Britons who own cryptocurrencies has risen to 2.3 million – but at the same time, the number of people who could accurately describe who they are has declined.

This is of great concern to regulators. They worry that consumers who may not know what they are doing will end up losing mind-boggling amounts of money – and in fact, some have already.

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Some countries want to ban Bitcoin altogether – India and China among them – but doing so is easier said than done.

The decentralized nature of cryptocurrency means that the Bitcoin network is spread across the globe. There isn’t a single person who can be forced to shut it down, and no computer that can take everything offline.

This has created a multi-year headache for regulators, not least because of the way Bitcoin is often in demand after ransomware attacks.

And all of this comes before discussing the impact of cryptocurrency on the environment. If Bitcoin were a country, it would be the 24th largest consumer of energy – ahead of Poland and Egypt, and on the verge of overtaking Thailand and Vietnam. To compound the problem, less than half of the energy it uses comes from renewable sources.

Image: McDonald’s likes now accept Bitcoin for burgers – but only in El Salvador

At the same time, we are starting to see how this cryptocurrency could potentially be used in everyday life.

Several Latin American countries are closely monitoring El Salvador, which has made the bold decision to adopt Bitcoin as legal tender. Cryptocurrency can now be used as a form of payment nationwide, including at Starbucks, McDonald’s, and Pizza Hut. And given that migrant workers trying to send money home to loved ones currently face high fees when using cash, it is also hoped that Bitcoin could significantly reduce those costs.

Inevitably, the other question is whether the price of Bitcoin could rise further.

UK financial institution Standard Chartered has predicted that Bitcoin could hit $ 100,000 (£ 72,000) by early 2022. A Bloomberg Intelligence analyst also told me that price is now “the path of least resistance” short. term.

But growing regulatory oversight and a precarious global economy mean this is far from guaranteed.

Image: Bitcoin touched close to $ 67,000 on Wednesday – the highest price on record

Over the course of its 12 years of existence, a steady pattern of four-year cycles has formed – propelling Bitcoin to record prices before falling sharply.

In 2013, Bitcoin went from $ 100 to all-time highs of $ 1,150, then fell 73% to a low of $ 310 in 2014.

Fast forward to 2017, and a similar pattern appeared. During the year, its price rose from $ 800 to $ 20,000. Come 2018 and it has lost 80% of its value, falling below $ 4,000 at one point.

If this pattern is repeated once more, Bitcoin will collapse in 2022, decimating investments from those who tried to jump on the bandwagon when prices were high.

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Twitter is full of crypto experts – often anonymous – who confidently state that a single Bitcoin will be worth millions of dollars in the future. Others are dangerously suggesting that their subscribers take out loans to buy Bitcoin, which could lead to financial ruin in an unregulated market where consumers have no protection if something goes wrong.

A Bitcoin enthusiast told me he was adamant that it would make traditional currencies obsolete – and this cryptocurrency will someday be used to buy bread and pay rent.

This argument does not make sense given its volatility. Who would spend £ 1 of Bitcoin on a loaf of bread when it could be worth between £ 20 and £ 5 in a year?

Love it or hate it, Bitcoin is not going anywhere. While this latest wave is good news for some, it will be very bad news for those who jump in at an inopportune time – blinded by astronomical gains and celebrity endorsement.

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