The world’s first digital currency, Bitcoin (CRYPTO: BTC) has been the harbinger of a new financial order with the potential to survive any crisis if history is to be believed.
Originally described in 1991 by the research scientist Stuart Haber and cryptographer W. Scott Stornetta, the earliest version of blockchain technology was designed so as to introduce a computationally practical solution for time-stamping digital documents that could not be tampered with.
While this version underwent some modifications with the incorporation of Merkle Trees, the technology was never used and subsequently led to the patent getting lapsed in 2004.
Satoshi Nakamoto Publishes The Whitepaper
A few years later in October 2008, Satoshi Nakamoto – credited as being the founder of BTC, published a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” to outline how online payments can be facilitated without having to rely on financial institutions for transaction purposes and truly introduced blockchain technology to the world.
Further, the proposed solution aimed at avoiding the double-spending problem by adopting a consensus mechanism known as proof-of-work (PoW) and doing away with the need for privately verifying every transaction, as is done by trusted third parties such as banks in the traditional financial world.
Employing a network of computers to validate transactions, timestamp them and record them in the form of blocks that cannot be altered once created, this paper marked the genesis of BTC, the world’s first cryptocurrency, which was launched a bit later on 3rd January 2009.
BTC Records 9,000,000% Jump In One Decade
In the next decade, BTC went from complete obscurity to taking center stage in the global financial order when it peaked at its all-time high of $68,990.90 while recording a staggering 9,000,000% jump in its price between 2010 and 2020.
While a lot of BTC’s history may not be apparent to today’s clutch of millennial and Gen-Z investors, Pratik Gauri, Founder of 5ire, a fifth-generation blockchain ecosystem, says, “Most people agree that BTC was a response to the 2008 financial crisis and is reflective of faltering confidence in the global financial system.”
He adds that while crypto-assets are more closely entwined with the financial markets today due to the tremendous amount of interest and investments in everything crypto, digital assets like BTC do not respond to world events like a war or an economic crisis in lockstep with traditional financial markets.
The prices of most crypto assets remained steady throughout the recent pandemic that shut down the global economy and even went on to new highs in late 2021.
Despite this inherent disconnect from market events, cryptocurrencies do suffer from bouts of volatility that can unnerve even the most seasoned investors.
The volatility seen in the crypto market may not be a response to a financial crisis but is largely due to the speculative nature of the underlying assets and is driven by public sentiment regarding how well they will perform in the near future.
Moreover, crypto markets are not as heavily regulated as the traditional financial markets, so it is difficult to pinpoint who or what is moving the markets and their wild swings.
What makes cryptos immune to financial meltdowns?
Rahat Beri-Founder and CEO of Acryptoverse, a blockchain and crypto advisory firm, says BTC was built to last in the face of financial breakdowns since it is not controlled by any particular government and cannot be ‘printed’ as seen with the US Dollar during the recent COVID-19 pandemic.
“While no asset is 100% recession-proof, we can bet on BTC’s survival, thanks to its isolation from local events and due to its unique value proposition. I call these the 3Ds of BTC – Disassociation from financial markets and gold, Delinking from geopolitical crisis or regional laws, and being a Decentralized store of value with a capped supply,” Beri says.
These elements endow BTC with the potential to challenge the traditional financial system, blurring geographical divides and ensconcing itself from the ripple effects of stock market crashes.
Governments across the world are still trying to peel its layers in a bid to exploit BTC’s potential and probable loopholes. It is my firm belief that the world can count on this landmark digital currency and we should see it comfortably sail through these macro whirlwinds,” according to Beri.
While it is difficult to ascertain the actual number of BTC owners across the globe, it is estimated that there are 200 million BTC wallets with an average of 270,000 BTC transactions being clocked daily. The cryptocurrency continues to dominate the market capitalization charts and with just 21 million BTC available for grabs eventually, it does seem likely that BTC will live up to its moniker of being ‘digital gold’.
This article was submitted by an external contributor and may not represent the views and opinions of Benzinga.