In May 2010, Laszlo Hanyecz bought two pizzas for a total value of $30, or 10,000 bitcoins. At the time, the price of one bitcoin was $0.003, or 3 tenths of a cent. This was the first known purchase of tangible goods for cryptocurrency. Bitcoin itself appeared even earlier though – at the beginning of 2009, and as you can see, it cost practically nothing.
In December 2017, the market price of Bitcoin reached its all-time high of nearly $20,000. Over a period of nearly 8 years, it has grown more than an astonishing 5,000,000 times. Today it hovers around the $4,000 mark, and many people see this as a sign that it has failed, and that it has no future, as its best days are behind it. Is that the case?
Most of the media and society, in general, tend to overlook the impressive growth of the world’s first cryptocurrency and are more focused on short-term reductions in its price.
This has a psychological explanation. They want to convince themselves that they were right in not buying Bitcoin earlier. “This is a bubble, a pyramid scheme, and will soon burst and collapse” – this is the general opinion of most of the media and people who are few familiar with the essence of Bitcoin and cryptocurrencies. If you did not buy Bitcoin, then reading articles about how its price falls will undoubtedly make you feel better.
In addition, many people have a fear that Bitcoin can be hacked, and that they will lose all their money as a result. These concerns are constantly fueled by the media with stories about successful hacks of crypto exchanges. the truth is that Bitcoin itself has never been cracked, and it is practically impossible to do it. It is protected by a highly-reliable cryptographic algorithm. It is by no means safe to keep Bitcoins in accounts on crypto exchanges, but Bitcoin itself is a completely safe system.
Many early adherents of Bitcoin believe that Bitcoin is destined to constantly grow in value, thus, they are not planning on spending or selling them. They are convinced that the era of paper and fiat money is coming to an end and soon, dollars, euros, yen and other government currencies will ultimately be worthless and become as useless as stamps in the Weimar Republic of Germany from 1918 to 1924.
One of the main factors contributing to the growth of Bitcoin’s cost is its limited supply. No more than 21 million units will ever be released into circulation. Currently, there are less than 18 million. For comparison, there are more than 1,7 trillion US dollars in circulation, and this amount continues to grow as the US government continues to print money via the Federal Reserve, which is privately owned, by the way. No big deal. If Bitcoin is to completely replaces the US dollar from circulation, then the price of the cryptocurrency should be at least $85,000 (considering the current value of the dollar).
The global market for all fiat money is estimated at more than $37 trillion. If, hypothetically, Bitcoin were to supplants them, then its value would be around $1,8 million. If it takes over only a tenth of this market, then its value will reach upwards of $200,000.
No one can accurately predict how much bitcoin will cost even in the nearby future. Various forecasts of the maximum cost vary by several times – from $50 thousand to $1 million. 2 years ago, the price of $10 thousand seemed like science fiction.
John McAfee, CEO of MGT Capital Investments and creator of McAfee Security antivirus, predicts that it will reach $1 million by 2020. Perhaps way too optimistic, but not impossible. Either way, Bitcoin will continue to grow in value, since its quantity is limited, and the volume of the commodity market is constantly growing. Growth will be slow, but not stop.
Once Bitcoin becomes the primary global currency, then a value of over $1 million will not seem that big. Earth’s population now exceeds 7 billion people. If all bitcoins are distributed evenly among all inhabitants of our planet, then everyone will get less than 0.003 BTC. With a price of 1 Bitcoin at $1 million, this is just $3,000. Looking at the current distribution of the average financial well-being of 1 adult in the world, you will find that these numbers are surprisingly accurate.
When the Internet was invented, many in the world were skeptical about it and did not believe in its potential. Today, the Internet has practically eliminated paper mail letters and paper press on an international level. Bitcoin is only a decade old, and it is more than likely to repeat the success of the Internet. Its best years are still ahead. A new monetary paradigm is emerging before our eyes, and those that choose to make use of the opportunity will be rewarded.