Why is everyone so excited about Bitcoin?
Its exchange rate increased from $0.06 up to $55,800 (February 17th 2021).
What affects the growth of the Bitcoin market is the main topic of the article. Still, the retainers such as hacker thefts and scalability problems of the first-ever cryptocurrency will also be discussed here.
Don’t know what Bitcoin is? We got you covered.
A short introduction to Bitcoin
Bitcoin first appeared in 2009. Back then, only a couple of individuals tried using it.
And after years of proving itself, Bitcoin earned the confidence of a vast audience. Now it is a new and highly invested industry.
Bitcoin is decentralized. Think of it as a network where transactions are conducted. The main idea is the absence of a central server. The network is spread among all users’ devices.
Constant fluctuations in the exchange rate is a normal thing for Bitcoin.
The reason for this is the young age of cryptocurrency. Bitcoin is a volatile currency. Although its price can go up and down from time to time, it only aims to rise in the long term.
Bitcoin first appeared in 2009. Back then, only a couple of individuals tried using it.Click to tweet
Wait a minute, if there is no central server or authority, who then determines Bitcoin’s price?
Bitcoins are mined. No, people do not use shovels for mining. Since we live in the Internet age, miners mine Bitcoins using powerful computers that solve certain algorithms. The cost of mining mostly affects the price of Bitcoin.
What affects the Bitcoin market growth?
At a rough guess, everything related to Bitcoin can affect the market, not only the already mentioned reasons — the young age and completely different nature of this currency (compared to fiat ones).
The main driving force behind Bitcoin is the community. The more people accept Bitcoin, the more it powers the whole market. That’s exactly what is happening right now.
Little by little, governments of different countries start to accept Bitcoin as payment and establish laws covering the sphere of cryptocurrency.
It is essential for the market because earlier, even the countries supporting Bitcoin couldn’t adopt it by all rights because they had no laws concerning cryptocurrency.
After Japan recognized Bitcoin as a legal means of payment, the Bitcoin exchange rate has surged upward. As a result, the Bitcoin market in Japan is now one of the major ones. If you’re in Japan, you can even use certain airline services that accept Bitcoin.
The fact that the number of Bitcoin-related startups entering the market is growing day by day also contributes to the faster development of the cryptocurrency ecosystem.
As for now, you can find a wide variety of services related to Bitcoin. For this reason, the market is currently at the stage of regulation. Such regulation will help to get rid of unreliable services that won’t withstand the competition.
As an example, let’s take Bitcoin exchanges. Now there is a wide variety of reliable ones, but still, there are exchanges that are either unable to provide strong security due to financial reasons or merely swindlers.
That’s why to be sure to use the top exchanges, which you can rely on. Like Canadian Bitcoins, local exchanges serve the clients within a particular geographic area, and international exchanges, like CEX.io, earned trust among the users worldwide.
So, the stated above, UK-based CEX.io provides seamless service to 95% of countries and supports Bitcoin and Ether trading with relatively low commission fees. Due to the solid approach to customer privacy and security CEX.io has been one of the most reliable Bitcoin exchanges, serving over a million satisfied users.
The decentralized nature of Bitcoin makes it absolutely impossible to steal coins from within the blockchain. In other words, you cannot cheat the system. It is made perfectly without any chance for hackers to steal Bitcoins.
Although, periodically, they carry out attacks on the exchanges or wallets to steal Bitcoins stored on the websites’ servers.
2014 was the year of the greatest Bitcoin theft. The victim exchange was MtGox, one of the largest and the most popular at that time. MtGox held up on the withdrawals, so, basically, people couldn’t’ get their money out.
Bitcoins worth $460 million were stolen. Hackers seem to find their place in the sun since that time. But you know how they say: “What doesn’t kill us makes us stronger.”
Of course, as soon as it happened, the exchange rate of Bitcoin decreased dramatically. But this incident served as a lesson to other exchanges.
It set a bad example of how everything can go wrong because of poor security. As a result, today’s security of exchanges and wallets is much stronger than it was at the MtGox times.
The extraordinary growth in newcomers is a piece of excellent news for Bitcoin. However, it has also posed a problem. Since the birth of Bitcoin, the source code has had only a couple of minor upgrades. After 2015 the total number of transactions has tripled. As a result, Bitcoin faced a scalability issue.
In other words, the network found it hard to process many transactions, running into a problem that sometimes you could wait up to an hour before your transaction was confirmed.
The solution was to increase the capacity of the block in the blockchain. In other words, one block should be able to hold more transactions than was.
NOTE: Blockchain consists of blocks in which transactions are written. Approximately every ten minutes, one block closes, and the other one appears. When the block is completed, it means that all the transactions in it are verified.
The Bitcoin peer-to-peer system makes it difficult to define who should take the responsibility to upgrade. In other words, the issue was not that the Bitcoin network needed an upgrade. Instead, it was challenging to decide who should do that and in what way.
August 1st was believed to be a decisive day for the Bitcoin community. There were two possible outcomes on that day:
- A SegWit upgrade takes place fluently.
- Miners support a new Bitcoin network. In this way, the chain split occurs, and the price collapses.
August 1st, and what are the outcomes?
August 1st is left behind. Eventually, the Segwit upgrade was activated, so the Bitcoin network can now hold more transactions. Although, a chain split (or a hard-fork) had occurred as well. Bitcoin‘s price didn’t collapse. It passed through some fluctuations, but they were not substantial.
As a result, there are now “two Bitcoins”:
- BTC (The original Bitcoin blockchain where Segwit has occurred).
- BCH (Bitcoin Cash – an alternative Bitcoin with its upgrades. It shares the Bitcoin’s blockchain before the hard fork, although it continues along its way after it).
Some consider Bitcoin Cash as an Altcoin. Some ignore it and continue using the original Bitcoin. At the same time, others switch to a new network and do not use the original one.
Still, the majority of people accept both currencies. The new Bitcoin (BCC) has shown promising results considering the market capitalization over the last three days.
Standing right behind Ethereum, the market cap of Bitcoin Cash has already reached $7 billion. At the same time, the price is at the point of $400. Although the hard fork has virtually happened, it is too early to claim what will happen.
For now, the price of Bitcoin Cash increases and will possibly continue to because the new trading pairs are about to be launched on the major exchanges such as CEX.IO.
Still, the original Bitcoin doesn’t seem to hold either. There is no doubt that traders will pick up on this situation and propel the Bitcoin market.
The future of the Bitcoin market
No one would believe in 2015 that Bitcoin would be worth more than 13 thousand dollars in two years. No one would neither expect so many innovations and startups within the industry.
Without any doubt, whether it’s an original Bitcoin or an alternative one, the Bitcoin market will only expand and become more favourable for new users.
There is also a strong possibility of market purification. That is to say. We’ll see a strive for quality rather than quantity. To get to this point, Bitcoin SHOULD stumble (like it was during the MtGox hack).
All the upgrades take place only when mistakes are revealed. So, in reality, cognition comes through trial and error.
In this regard, the drivers help Bitcoin develop and retainers, making it misstep and boosting the long term.