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In the last year Bitcoin has gone 'viral'. As ConvergEx's Nick Colas notes, a lot has happened in 2013: Price appreciation, yes, from $20 to +$800 – the result of this online “Currency” going from science project to mainstream topic. Volatility too – disruptive technologies seldom travel a level path. The story, Colas notes, is about to change, and there are three critical gates which bitcoin must navigate in the New Year. First is regulation, and we will get a good dose of that next Tuesday and Wednesday when the New York State Department of Financial Services holds hearings on bitcoin and potentially issuing a ‘Bitlicense’ to help regulate business which transact in the currency. Second is adoption – how will existing businesses incorporate bitcoin into their sales, marketing and payment channels. Lastly will be volatility, which will have to come down in 2014 to encourage broader use.
If the ratio of dog-to-human years is something like 7:1, then a bitcoin year is something like 500 years to one regular 365 day turn of the modern currency calendar. Money as we know it today – a physical representation of stored economic value that supplants simple barter – goes back to about 600 B.C.. That’s when the Lydians – in modern day Turkey – started minting coins. It’s a lot easier to buy a sheep or a goat with a coin than working out a barter with the seller, and every advanced civilization since then has used currency in some form to make economic transaction easier. In 2008, an enigmatic programmer (or programmers) unknown released a paper describing an online payment system called bitcoin. At first it was basically a puzzle contest for cryptographic hobbyists, with a prize for solving an endless battery of puzzles. Bitcoins were code-breaking bragging rights that could be exchanged with others.
Then, in 2011, bitcoin began to find an actual following. Its anonymous nature – the core of the system does not hold name, address and other information typical of a standard banking system – made it ideal for illicit transactions. Individuals concerned over online privacy – ahead of their time, it now turns out – also appreciated the anonymity as well as the algorithmically controlled nature of the issuance of bitcoin. No open-ended checkbook (as the Federal Reserve enjoys) in the bitcoin world – every 10 minutes another 25 bitcoin appear. And that’s it. For all this adoption, bitcoin remained largely under the radar.
Last year, bitcoin had its debutante coming out party, and its price went from $20 to $230 to $80 to $1000 and closed the year at $800. We started writing about it in February, mostly because we thought it was interesting that society – a portion of it, at least – had sufficient faith in technology to hand over their heard earned shekels to distributed network of computers running a program written by person or persons unknown. Worshipping in front of a golden calf is one thing – making offerings to a virtual calf seemed to merit our attention. Over the course of the year plenty of other market observers tossed their two cents in the hat, mostly in hater mode.
Well, its 2014 and the value of all bitcoin outstanding sits at roughly $10 billion. Does that mean the future of the currency is assured? Of course not – there’s still plenty to go wrong. But what that hefty amount does demand is a reasoned approach to the fundamentals driving bitcoin’s future. There are headlines aplenty about bitcoin now – still, I think, with a distinctly skeptical eye. Which is fine. But to paraphrase a chant heard at many a street rally, ‘Bitcoin is here; get used to it.’
Resource: http://www.coinsetter.com Source for presentation: http://www.zerohedge.com/news/2014-01-24/bitcoin-2014-3-critical-factors
