Bitcoin just broke US$10,000. In hindsight it was inevitable

Posted: 29 November 2017 12:10 pm

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A coming of age story.

Bitcoin broke the US$10,000 milestone today, after a wild 2017. It started off at "only" US$770.44, but now seems set to end the year well over $10,000.

The enormous growth might be largely attributed to bitcoin breaking into the main stream, and becoming much more accessible than ever before. Buying bitcoin a few years ago called for a fair degree of expertise, plus a certain appetite for risk.

But these days all the facilities are a lot safer and much more user-friendly. 2017 might simply have been the first year that all the bitcoin market infrastructure evolved far enough to let almost anyone get involved.

There's also a certain degree of hype. The start of the year, plus September, October and November all saw very substantial new all time highs and anyone watching from the sidelines has probably found themselves wishing over and over again that they'd bought bitcoin.

And by the numbers, it looks like millions of them have decided to go ahead and just do it.

According to IG trading chief strategist Chris Weston the Coinbase cryptocurrency exchange added about 100,000 accounts in the two days from between 22 and 24 November alone.

"We’re hearing huge numbers," he said. "Somebody said half a million new users a day are coming through to bitcoin across the world."

"People are actively opening accounts left, right and centre, that new money coming into it is pushing it ever higher."

It couldn't have happened sooner

The immense growth in 2017 probably couldn't have happened sooner. In a slightly ironic twist, the main obstacle stopping people buying bitcoin might have been the need to pay with fiat currency, and the main obstacle for exchanges might have been the need to accept fiat currencies somehow.

2017 was the year the industry managed to overcome:

  • A largely hostile banking industry
  • Foreign currency problems
  • A lack of payment options

A hostile banking industry

Banks around the world have blocked various services. For example, by suddenly withdrawing banking services from bitcoin companies, ostensibly to prevent money laundering but more likely in an effort to stymie the competition. One more notable example is the high volume Bitfinex exchange whose fiat currency deposits were completely cut off in April 2017. Since then it just continued to successfully operate as a pure cryptocurrency exchange.

The increasing popularity of bitcoin and rapid proliferation of cryptocurrency services tipped the scales in 2017.

Foreign currency problems

International bank transfers are extraordinarily expensive. These are essentially just banks passing money to each other in a pre-negotiated route around the world, with each bank charging fees along the way. Where currency conversions are needed, it will typically involve converting the original currency into a central one (typically USD), and the converting those USD into the destination currency. Each of these exchanges is typically done at noncompetitive rates.

These costs make it almost impossible to send small amounts of money with bank transfers, and very expensive to send larger amounts. This effectively bars people from getting into cryptocurrency without a local service that they can pay directly in local currency.

But 2017 saw more brokers and exchanges go international, and start up in new countries around the world. Finally being able to pay in local currency with minimal fees has greatly lowered the barrier for entry to bitcoin. People who simply couldn't afford the cost of paying with fiat currency can use newly-created local services.

A lack of payment options

With solutions to the above problems came more payment options.

These days there are plenty of ways to buy bitcoin with credit card but that wasn't the case a couple of years ago. Similarly, against all odds you can even buy bitcoin with cash now, or pay via PayPal. And if you really want, it's now possible to buy bitcoin with cash.

Bitcoin's wild ride in 2017 was the result of the dam bursting, and more people buying than ever before. US$10,000 might be an artificial milestone, but it's still a coming-of-age story for cryptocurrency as a whole.

Historical Rate chart of BTC and AUD

Updated: 19 Oct 2021 06:03:52 UTC
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