Thoughts on the record high price of Bitcoin: How can this black swan in the financial field achieve a perfect transformation?

In recent days, the price of Bitcoin has reached a new all-time high of $1,220, a full $45 higher than the peak in 2013. But how did it do that? According to the media industry and so-called financial experts, Bitcoin was dead three years ago when the price crashed to below $200.

At the time, Bitcoin was labeled as a tulip bubble and a Ponzi scheme. Onlookers not only regarded Bitcoin as a joke, but were even hostile to it. American economist Paul Krugman became famous for his article "Bitcoin is evil" in 2013. Subsequently, other mainstream media also published articles such as "The day when the price of Bitcoin hits $0" and "The price of Bitcoin will fall to $10 by mid-2014".

I understand that it’s easy to lose sight of Bitcoin after Mt. Gox lost $450 million. It’s easy to assume that since the price of the currency has collapsed, Bitcoin will disappear. However, that’s not the case. If you can step back and look at Bitcoin without any preconceptions, you’ll find that Bitcoin has actually been thriving.

Qualitative growth

The bubble in 2013 pushed the price of the coin from $10 to $1,200. Since then, in addition to the continuous decline in prices, the entire ecosystem has witnessed its own rapid development.

Retail giants Dell, Expedia, and even Microsoft have begun accepting Bitcoin as a payment method. World-class technology experts and investors such as Marc Andreessen and Richard Branson are positive about blockchain technology, believing that it can promote a new generation of currency reform. Countries such as China have begun to explore blockchain technology and plan to create their own virtual currencies. Even Federal Reserve Chairman Ben Bernanke once said:

Virtual currency has long-term development prospects. Once this innovation can create a faster, safer and more efficient payment system, its development potential will be limitless.

These are the big events that people have witnessed in Bitcoin’s adversity. Pandora’s box has been opened and no one can stop it.

Volume growth

Let’s look at the numbers. When the price of Bitcoin plummeted in 2014, the transaction volume of Bitcoin increased from $15 billion to $25 billion, a 57% increase; venture capital funds in related fields increased from $96 million to $335 million, a 342% increase; venture capital companies investing in Bitcoin companies increased from 8 countries to 18 countries, a 125% increase; the number of Bitcoin wallets increased from 2 million to 8 million, a total increase of 400%; the average daily transaction volume of the Bitcoin network increased from 54,000 to 150,000, an increase of nearly 300%; the number of merchants accepting Bitcoin payments worldwide increased from 14,000 to 45,000, an increase of 200%; and finally, the computing power of the entire network increased from 10,000 TH/s to 300,000 TH/s, an increase of 3000%.

The question is, why has this progress never been reported in the media and no one is talking about it? I think the answer to this question is very complicated. Simply put, Bitcoin makes a lot of people uncomfortable. With the advent of Bitcoin, people began to question the definition of money itself. Can a new type of money exist that is beyond the control of central banks? When many people began to think about this question in their minds, they had already decided that mocking and questioning Bitcoin was the norm that made them feel comfortable. However, the reality is that a silent reform is taking place in secret.

Current development status?

Today, the price of the currency has reached a new high. Currently, the Bitcoin network is handling $1.8 billion in transactions per week, and there is no sign of it slowing down. The data in the above chart has increased significantly since 2014. The following reasons clearly explain why we should be optimistic about the future of Bitcoin.

1) The Bitcoin protocol was halved in July 2016. Halving means that the number of new coins that can be mined in the network is reduced by half, and it happens every 4 years until the supply reaches its peak.

2) As the People's Bank of China (PBOC) continues to push forward its policy of devaluing the RMB, Chinese people will begin to look for ways to preserve the value of their currency. Therefore, the demand for Bitcoin in China will not decrease.

3) Bitcoin is regarded as digital gold and plays a role in preserving value. In the short history of Bitcoin, events such as Brexit and the Greek debt crisis have driven the rise in the price of the currency and increased demand. The uncertainty of the future of the European Union and the instability of the Trump regime are positive factors that promote the prosperity and development of Bitcoin.

4) Hyperinflation. Many countries are currently experiencing hyperinflation, and Bitcoin provides a safe haven for people living in these countries. For example, in the past six months, Bitcoin trading volume in Venezuela has increased by 1,200%. Venezuelans even use Bitcoin to buy daily necessities on Amazon. No one is willing to use Bolivar because this currency is basically worthless.

5) Expansion: At present, developers have built a lot of exciting new protocol layers based on the Bitcoin protocol. The lightning network, which is scheduled to be launched this year, can increase the transaction settlement volume to 1 billion per second at almost no cost. Visa processes 30,000 transactions per second, but this network cannot handle small transactions because the handling fees are too high. Another expansion product is Rootstock (RSK). It is a smart contract platform that greatly improves the capabilities of the Bitcoin network. With RSK, you can not only send transactions in the network, but also deploy a complex description in each transaction.

Summarize

Bitcoin will continue to grow and innovate over the next few years. It is important to remember that Bitcoin, unlike everything else, is in a constant process of development and evolution.

For some, it eases the pain of transferring money across borders; for others, it is a store of value that is an effective hedge against central bank and government corruption and hyperinflation; and for the 4 billion people in the world who lack access to banking services, Bitcoin is the first step towards fair treatment.

I hope you will continue to pay attention and learn about Bitcoin, which is an important driving force for future reforms. Remember, when you hear the "Bitcoin is dead" statement again, please take a step back and think carefully, because that may be the best time for you to get Bitcoin.