Welcome to 2017, and our first news recap of the year. We’re two weeks in, and already bitcoin has been on a tear. It’s been dubbed the top performing currency of 2016, and the price reached highs not seen since 2013. Read on for news covering these milestones, the challenges ahead, and plenty more as we usher in a new exciting year.
The price rally of Q4 2016 & Chinese market influence
Our final recap of 2016 included speculation about whether the bitcoin price would topple the $1,000 mark in the last few hours of the year or not. It was definitely a close call, but December’s rally slowed slightly between the 30th and 31st, only to pick up the pace and surpass $1,000 on the first day of the new year. Bitcoin gained 123% value last year, and it was dubbed the top performing currency of 2016. Business Insider author, Jonathan Garber, so-eloquently described it with his article titled, “Bitcoin is going bananas.”
Some headlines suggest the strengthening of the Chinese yuan, coupled with a decrease in demand for bitcoin on Chinese exchanges were key factors causing the price to subsequently drop. At the time of writing it now sits at $818 USD, and whether we’ll see the price perk up to those early 2017 highs again soon could depend on the SEC’s approval decision for the Winklevoss ETF, which was moved to March. Brave New Coin’s Luke Parker highlights the slow, organic growth demonstrated since October, which is in stark contrast to the typical frenzy during bitcoin’s history of speculative bubbles.
While the majority of bitcoin trading happens out of China, an NY Times article suggests most of the recent price movement is “a result of bets by speculators,” as well as activity from wealthier Chinese citizens who use bitcoin as a way to avoid their government’s strict capital controls. In the same article, the author suggests that much of the trading is driven by hope of its future potential as opposed to its degree of utility today.
Bitcoin’s resilience shines around the world
Looking beyond China’s market to a more global economic perspective, our Co-Founder Nicolas Cary explains bitcoin’s resilience as a phenomenon called antifragility, which occurs when “a property of systems” (in this case, bitcoin’s value) “increase in capability and resilience as a result of stressors, shocks, attacks, and faults.” And as we’ve covered time and time again, bitcoin is drawing the attention of new users and governments from around the world. More recently, Indonesia is in the spotlight for its rise in bitcoin users, despite Bank Indonesia’s 2014 usage warning and shift to a neutral stance that bitcoin was not considered legal tender. It also became increasingly useful for Indonesians last May, when large payment platform KinerjaPay Corp., enabled bitcoin payments, which meant that users could “pay their bills, transfer money, or make purchases in the [c]ompany’s ecommerce market.”
Indonesian bitcoin users remain hopeful that their government will slowly embrace the digital currency. On a similar note, many people in Nigeria are also embracing it, according to NewsBTC author, JP Buntinx. While Buntinx does not provide a source for his number of Nigerian bitcoin-accepting merchants, the depreciation of the Naira and demand for affordable money transfer services could certainly increase bitcoin’s appeal locally. Greece may see a spark in bitcoin interest once again, as headlines from ZeroHedge and The Dollar Vigilante indicate the government has taken steps towards encouraging use of a payment card over cash for consumer goods and services in what has been dubbed a “‘soft’ cash ban.”
Bitcoin’s 8th birthday, and different phases of growth
— Blockchain (@blockchain) January 3, 2017
Bitcoin celebrated its 8th birthday on January 3rd. The $1,000+ price and positive outlook for 2017 gave the bitcoin community a big reason to celebrate. And in a period where gold decreased in value, bitcoin managed to become the only currency to surpass it. Other milestones over the past 12 months include development of major scaling innovations like SegWit, plus the surge in wallet generation from major providers including our wallet, which recently passed the 11 million mark, and also Coinbase, at 5.3 million.
Entrepreneur Vinny Lingham joined in on the birthday festivities in a post that outlines the 3 phases of bitcoin, with 2016 being the last year of Phase 1, “Creating a Digital Commodity.” As we move into Phase 2, “Proving it as a Store of Value,” Lingham points out that the 20X annual returns seen by early bitcoin holders should not be expected over the same period of time as bitcoin matures, but “over a longer period of time and in [a] more sustainable fashion.” He stresses that bitcoin must demonstrate “steady growth and low volatility” in order to enter Phase 3, when it’s considered currency.
Another inspiring call to the bitcoin community came from digital currency and blockchain enthusiast Don Tapscott and son Alex, who co-authored a Huffington Post piece explaining why 2016 was the most important year for bitcoin since the white paper was published in 2008. Both see the big challenge for 2017 to be governance, and a push for the community to get organized and pull together.
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