Cryptocurrencies are notorious for their volatility, and this ignominy is perfectly borne out by the history of the bitcoin to pounds exchange rate. It's a journey of roller coaster highs and lows guaranteed to have the most risk-tolerant investors salivating and the risk-averse quaking.
The BTC-pound exchange rate soared from £815 in 2017 to £48,000 in 2021. At the time of writing, the exchange rate was back down to around £18,000. What were the catalysts for the extreme corrections in the Bitcoin-pound exchange rate? It will come as no surprise that most of the causative events were unforeseen.
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Takeaways
Do you know what is predictable with Bitcoin?
What has driven successive gains in the price
Which major players are getting involved
Bitcoin initially had no value. In 2009, the exchanges that existed for crypto were purely used for testing and were unknown by the public. The first bitcoin value on the market was recorded on October 5, 2009, when the bitcoin buying and selling service New Liberty Standard came up with a ratio equivalent to 1,309.03 Bitcoin for $1.
New Liberty Standard bought a total of 5.050 Bitcoin from Sirius in 2009 for $5.02 through the online payment provider, PayPal. PayPal was keen to see a digital currency emerge onto the evolving fintech landscape. It would play another significant role in the evolution of Bitcoin some 11 years later. This transaction established that approximately 1.010 Bitcoin was equivalent to $1. This marked the first significant increase in the value of Bitcoin.
In March 2011, the Britcoin exchange was launched, which allowed Bitcoins to be exchanged for British Pounds (GBP). Bitcoin had a rough start, however, and was plagued by hackers in its early days. The case of Mt. Gox was a harrowing event for Bitcoin holders. On June 19, 2011, unknown attackers forced a security breach and stole thousands of bitcoins from the exchange. This hack also stole usernames and email accounts. This was the precursor for many more thefts of bitcoins and other cryptocurrencies.
Bitcoin's more sinister reputation was further entrenched by Silk Road. This was known as a dark web marketplace for illegal products, such as drugs and weapons. Because of crypto's user anonymity, Bitcoin was the preferred payment method for Silk Road traders. In October 2013, the creator of Silk Road, Ross Ulbricht, was arrested by the FBI. This further sullying the reputation of Bitcoin and questioning its legitimacy as a currency.
In 2015, Coinbase, the Bitcoin wallet, exchange, and merchant services provider, launched in the United Kingdom. It allowed the trading of two new currency pairs on the Coinbase Exchange - BTC/GBP and BTC/EUR. At the time, Coinbase was the biggest exchange by volume in the United States. Coinbase's major problem had been getting governments to cooperate. In the United Kingdom, the exchange found favor with the Financial Conduct Authority (FCA). The FCA agreed to support GBP payments.
The co-founder of Coinbase appreciated what he called a "forward-looking attitude" by U.K. regulators and manufacturers toward Bitcoin. The computer giant Dell was the biggest company in the United Kingdom to accept Bitcoin for sales. It appeared that Coinbase had paved the way for British businesses to accept bitcoin in exchange for goods and services.
There was an explosive jump in the bitcoin to pounds coin rate in mid-2017. The rate jumped from around £815 at the beginning of the year to £14,000 on December 11. According to Andrew Urquhart of the University of Reading, this initial bull market was accredited to FOMO (fear of missing out) sentiment among investors. True to form, however, the rate than slid back a year later to around £2,500.
In mid-2019, Bitcoin rose to around £9,500 in August, with speculators citing various explanations. A weakened yuan caused by an escalating U.S. China trade war stoked by then president Donald Trump , high Bitcoin volume on Binance, a 50% reduction in block rewards to Litecoin miners, and looming Brexit and the downward pressure on the pound.
The COVID pandemic saw Bitcoin trading as low as £4,000 in March 2020. The cryptocurrency then soared to £20,355 by the end of the year after backing from PayPal. The payment platform once again showed faith in the crypto and added the use of Bitcoin to its services for U.K. users.
In 2021, Bitcoin spiked in November at an all-time high of around £48,000 but then tanked to around £27,000 within six weeks. Elon Musk did not share PayPal's confidence. The Tesla CEO announced that his company would no longer accept Bitcoin because of mining concerns linked to the environment.
By July 2022, Bitcoin had plunged even further to around £18,000. This time, the fault was laid squarely on the doorstep of inflation fears. It was also related to announcements from China that it was banning banks from providing crypto transactions.
It is safe to say that Bitcoin's colorful history since 2009 has done little to advance its case as a legitimate and stable currency.
Bitcoin is a high-risk investment. First, there is no regulation. Part of the problem with regulation is that Bitcoin is decentralized. There is no single controlling entity or government for Bitcoin and other cryptocurrencies that can call the shots. But while governments can't exert control over Bitcoin, they can influence the price of crypto.
For example, governments could, either individually or as a group, buy and sell through international marketplaces and introduce regulations that would lead to an increase in cost. The United Kingdom is one country that intends to regulate cryptocurrency businesses.
The UK is currently a leader in the adoption of decentralized finance in Europe since crypto investors brought in more than $170 billion in 2020 and 2021. The planned regulatory package is designed to protect investors and prevent fraud, which Bitcoin proponents hope will encourage greater confidence among investors.
After a whirlwind few decades, what does the future look like for Bitcoin and other cryptocurrencies? According to Urquhart, billionaire investors like Paul Tudor Jones and insurance giant MassMutual have invested heavily in Bitcoin. Even former sceptics like JP Morgan now say that Bitcoin could have a bright future. Also, an increasing number of vendors are warming to Bitcoin. Even the payments giant Visa is partnering with crypto exchanges like Coinbase and Crypto.com and offering crypto debit and credit cards.
While supporters of crypto lend some legitimacy to its future as a currency, the only predictable thing about Bitcoin is its unpredictability. Crypto investors should be diligent in their scanning of the extreme topography of the Bitcoin and crypto landscape. If history and the currency charts are anything to go by, the crests and falls of bitcoin to pounds are not likely to level out any time soon.
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