The price of Bitcoin, the world’s first decentralized cryptomoney, reached a new all-time high on Monday at $44,700. More than ten years after its creation, what makes it so special and what makes it so attractive to investors, from individuals to Wall Street to Tesla?
Born after the 2008 financial crisis, Bitcoin initially promoted a libertarian ideal and aimed to overthrow traditional monetary and financial institutions.
The founding white paper was published on the internet on 31 October 2008. Its author: Satoshi Nakamoto, a pseudonym. The identity of the person or group behind it remains unknown.
In the eight-page document, Mr Nakamoto presents the purpose of his cryptography: « to make online payments directly from one third party to another without going through a financial institution ».
On 3 January 2009, the first block was created: 50 bitcoins were generated.
Many other cryptomoney systems have since been launched (ethereum, tether, polkadot, ripple…). Today, there are more than 8,000 of them, according to the specialized site CoinMarketCap.
There are currently around 18.6 million bitcoins in circulation. The money supply is gradually increasing as new units are issued. However, a ceiling was set when it was created: the number of Bitcoins can never exceed 21 million.
There are two ways of obtaining Bitcoins.
Historically, individuals could « mine », i.e. use the power of a computer to solve a computer puzzle, and be rewarded with Bitcoins.
But as prices have risen, the number of « miners » has increased and the odds of being the lucky one have been greatly reduced. Today, mining requires state-of-the-art equipment, and the electricity costs of the activity can far exceed the profits.
Bitcoins can now be bought on trading platforms, using traditional currencies. The funds are then held in a protected virtual portfolio.
To avoid piracy, some users choose to place their funds in a disconnected portfolio.
By 2013, Bitcoin, which was initially worth almost nothing, will exceed $1,000 and begin to attract the attention of financial institutions. A few months later, it faces its worst crisis with the hacking of the MtGox platform led by Mark Karpelès, where up to 80% of the bitcoin in circulation was traded.
The price collapsed and it would be more than three years before it was close to $1,000 again. In 2017, the price of bitcoin soared to $19,511 on 18 December, the highest price it had ever reached until it rose in recent weeks.
In the days that followed, the « bubble » burst and bitcoin fell back heavily: it only exceeded 10,000 dollars in mid-2019, before returning to 15,000 dollars in November 2020.
Since then, the combined interest of individual investors, investment funds and companies has been soaring. The electric vehicle manufacturer Tesla announced on February 8 that it had already invested $1.5 billion in cryptography.
In its early days, Bitcoin was mainly used on the « dark net » (the hidden face of the Internet whose content is not indexed by conventional search engines) to buy illicit products.
Over time, as its fame grew, a few restaurants and shops began to accept Bitcoin, mostly in large cities.
The latest Bitcoin rush was triggered by the announcement in October by Paypal: the online payment giant now offers its US users the opportunity to buy, sell or use Bitcoin as currency.
In the wake of its investment, Tesla promised that its vehicles would soon be purchasable in Bitcoin.
But for the time being, the first encryption technology is mainly of interest to both individual and institutional investors.
Its volatility remains a brake on its adoption as a means of payment. Another obstacle is the time it takes to validate the transaction. Depending on network congestion, payment confirmation can take anywhere from a few minutes to several hours.
Some of its supporters have even abandoned the idea of using Bitcoin as a means of payment and instead see in the first cryptomony a future digital gold: a means of preserving value beyond the reach of central banks.