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The Bitcoin is a topic of much discussion. But do you really know what it is? Who created it? What is it used for? How can you pay with Bitcoin? How can you buy Bitcoin? How do you mine Bitcoins? What are the solutions to invest in Bitcoin in 2024?
How this cryptocurrency is produced, why it can be considered a real currency, what its advantages are, how to invest in Bitcoin in 2024, and its tax implications. Discover the current price of Bitcoin and the issues related to its technology, role, present situation, prospects, and future.
The 5 essential things to know about Bitcoin:
Bitcoin is the first of the cryptocurrencies
Bitcoin (BTC) was created in 2008. It is the first cryptocurrency ever created and also holds the highest market capitalization among all cryptocurrencies. It alone represents more than half of the cryptocurrency market in terms of value.
The creator of Bitcoin remains unknown
The inventor of Bitcoin remained anonymous. It’s unclear whether it was an individual, a woman, or a group of people. The pseudonym known is Satoshi Nakamoto, who named the smallest unit of BTC as 1 satoshi = 0.00000001 bitcoin.
Bitcoin is more used as an asset for diversification than as real money
Bitcoin was created to challenge conventional currencies by giving citizens control of their money through a decentralized alternative to traditional financial and monetary systems. However, it’s rare to purchase goods and services with bitcoins. The cryptocurrency is more used as an asset for diversification, and its appeal to numerous investors rests on its potential profits.
Bitcoin is inherently a highly volatile asset As of late November 2023, Bitcoin has grown by 127% in a year. You might wonder: why does Bitcoin rise so quickly and why does it decline in such proportions? The high volatility of Bitcoin comes mainly from its low penetration rate in the real economy and its use as a financial speculation asset. It’s essential to be aware of this before investing!
This high volatility also explains the difficulty in predicting BTC prices. When will Bitcoin rise again? When will Bitcoin explode? When will Bitcoin fall? Predicting Bitcoin’s fluctuations is extremely challenging, even though cycles are observed. It’s hard to determine how long they’ll last as numerous factors come into play.
Bitcoin is supported by its enthusiasts: the maximalists
Did you know that Bitcoin has some unique followers? They’re called maximalists, and not only do they support Bitcoin and refrain from selling their tokens, which would be seen as a betrayal of their ideals (their motto is “hodl,” from a typo in a crypto forum comment for “hold”), but they also believe that creating other cryptocurrencies is nonsensical. In their eyes, an altcoin competes with Bitcoin, diminishing its chances of becoming an alternative to all currencies.
Bitcoin: How does it work? How does it function?
Bitcoin is an intangible currency or cryptocurrency that allows its holder to buy goods and services online or in real life. Unlike traditional currencies, Bitcoin, like all virtual currencies, is not issued by a central bank and has no central body or financial institution to regulate it. Instead, Bitcoin relies on a vast peer-to-peer network on the Internet.
Bitcoin is somewhat the result of the combination of the P2P network idea, cryptographic techniques, and the concept of currency. As a result, Bitcoin, and subsequently other cryptocurrencies, might be establishing a new type of financial system, a completely decentralized and entirely free alternative monetary system.
The underlying technology of Bitcoin is the blockchain or block chain system. It securely stores and transmits data transparently and unalterably. Each transaction corresponds to a block added to a constantly growing block chain that keeps track of all transactions.
This block chain operates through a network of computer nodes that enable the use of Bitcoin as a decentralized digital currency in a peer-to-peer manner. Any computer or device connecting to the Bitcoin interface can be considered a node. It communicates with other nodes by transmitting information related to transactions and blocks.
Who created the cryptocurrency called Bitcoin?
Bitcoin is the work of a genius who goes by the name Satoshi Nakamoto. That’s all we know. It could be a man or a woman. It could even be several people; nobody knows.
Many personalities have claimed to be the originator of Bitcoin, and widely publicized lawsuits have made headlines about it. Nevertheless, the identity of Satoshi Nakamoto remains unknown. Numerous theories regularly circulate on the Internet regarding the person or organization behind Bitcoin’s creation.
How many Bitcoins are in circulation worldwide?
You might wonder how many Bitcoins exist in the world. As of late November 2023, according to Coingecko, about 19.55 million Bitcoins are circulating globally (compared to 18 million at the end of 2019, 16 million in 2016, and 10 million in 2013), with a total market capitalization of around 506 billion dollars compared to 66 billion at the end of 2019, 6 billion in 2016, and 1 billion in 2013. Thus, more than 93% of Bitcoins are already in circulation. So, how many Bitcoins are left to mine? The answer is slightly over 1.5 million.
The quantity of circulating Bitcoins is automatically defined by a network of computer servers, called miners, spread worldwide. They confirm transactions and add them to a decentralized transaction ledger. The volume of circulating Bitcoins will reach precisely 21 million units by 2140, as per the algorithm’s projection.
Due to its success, the current Bitcoin network configuration is on the verge of saturation, which might lead to congestion and a degradation of service. Faced with this danger, a solution seems necessary: introducing technical innovations to enable the network to handle more traffic.
Moreover, it was an attempt to find an alternative that led to the 2017 fork that gave rise to Bitcoin Cash, created from a secondary chain sharing a common trunk with the main blockchain. The latter allows validating transaction blocks much faster and at a lower cost, but it also requires much more computing power than Bitcoin.
How are Bitcoins produced?
Here it becomes a bit technical—and a bit strange.
Bitcoins are “mined,” following a predefined algorithm. They come in batches of 25 units and reward the computational efforts to find a solution to what appears to be a random mathematical problem. However, the term used is not “excavate” or “create” Bitcoins but rather “mine” Bitcoins.
Those who produce Bitcoins are called miners.
The algorithm’s role is to ensure that the growth rate of Bitcoins becomes increasingly slow by halving the reward every four years. Hence, at the beginning of 2017, the reward dropped to 12.5 units and then to 6.25 units in 2020. Simultaneously, the difficulty level of the mathematical problems to solve increases over time, which results in spacing out the rewards.
The algorithm was designed so that Bitcoin behaves exactly like a scarce commodity that offers diminishing marginal returns when exploited. Similar to gold or oil, for example (easy and cheap to find initially, then increasingly difficult and expensive).
To mine Bitcoins, more and more time and resources are needed (computing power, computer hardware, developers). As a result, even though virtual, the supply of Bitcoins is constrained. This algorithm gives Bitcoin immunity against inflation.
In this regard, Bitcoin is the opposite of the Linden dollar, the exchange currency in the online virtual world Second Life (do you remember?). The latter is produced by a central authority, a de facto monopoly, at its discretion, without any limits.
The scarcity of Bitcoin is one of the elements that give it value. Another element is its usefulness as a means of payment.
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What is the Bitcoin halving?
The Bitcoin halving refers to the phenomenon where miners’ rewards are halved approximately every 4 years, or every 210,000 excavated blocks. The last halving occurred on May 11, 2020, and two previous halvings took place: on July 9, 2016, and earlier on November 28, 2012. The halving on May 11, 2020, reduced the miners’ reward from 12.5 to 6.25 bitcoins. With halving, the total computing power required to record a new block on the blockchain will increase. And with it, the time taken for bitcoins to be mined also increases.
The halving, due to the scarcity of Bitcoin it causes, tends to raise the cryptocurrency’s price. The next halving is scheduled for April 6, 2024. Prices are expected to rise until then, and the increase should continue for about a year after the halving, reaching a new high for BTC.
How to mine Bitcoins?
Perhaps you’re tempted by mining activities and wonder how to mine Bitcoins, and more importantly, how many Bitcoins can be mined and in how much time?
While mining activities were relatively straightforward in the few years following the famous cryptocurrency’s launch, the computing power required today to mine a Bitcoin is enough to discourage an individual from becoming a miner.
Especially since Bitcoin mining difficulty and hashrate set a new record in summer 2023. On July 8, 2023, Bitcoin’s hashrate reached 448,000,000 TH/s. This represents an increase of nearly 100% compared to the previous year and 60% since the beginning of the year. As a reminder, the hashrate measures the mining power of a computer per second. It is usually measured in units of k (kilo, 1,000), M (mega, 1 million), G (giga, 1 billion), or T (tera, 1 trillion). For example, 1 Mhash/s means that one million hashing calculations are performed every second. At the same time, the mining difficulty also reached a new level by surpassing 55.62 T.
To mine BTC, you’ll need to equip your computer with software designed to mine Bitcoin. Then, you’ll need a significant amount of computing equipment to run your software while still using your computer, which won’t be easy.
Bitcoin miners are primarily professionals. They operate in massive structures equipped with substantial computer systems. In practice, Bitcoin mining has become highly professionalized in recent years, with Bitcoins now being mined in “farms” – warehouses spanning thousands (even tens of thousands) of square meters, housing computer servers operating at full capacity. These farms are typically located in relatively colder regions to prevent server overheating.
Bitcoin experienced unprecedented success in China, where numerous mining farms for the renowned cryptocurrency were established. Until 2020, the majority of Bitcoin miners were Chinese, with China’s share in Bitcoin mining estimated between 70% and 80% globally.
However, various measures undertaken by the Chinese government against BTC mining altered this landscape. Presently, it’s estimated that over 25% of miners are based in the USA, with only 10 to 15% of miners still operating in China, while others conduct operations from locations like Kazakhstan, Canada, or Russia.
Is Bitcoin a real currency and an actual means of payment?
This is a vast, almost philosophical debate, but we’ll attempt to provide some lines of thought.
For a currency to be widely accepted as a means of payment and a store of value, it should possess the following properties: non-perishable, identifiable, difficult to counterfeit, easy to transport, easy to store, fungible, and divisible.
Let’s examine whether Bitcoin possesses these properties:
Non-perishable: evidently, yes.
- Identifiable: akin to banknotes, each Bitcoin has its unique number, making it easily identifiable.
- Difficult to counterfeit: impossible to counterfeit, but an individual with sufficient computational resources might attempt to use the same Bitcoin for multiple transactions.
- Easy to transport and store: with just a smartphone or computer, it’s straightforward to store and transport a considerable quantity of Bitcoins.
- Fungible: similar to how one gold bar is interchangeable with another, one Bitcoin is interchangeable with another Bitcoin, hence demonstrating fungibility.
- Divisible: a Bitcoin can be subdivided into 100 million units, known as satoshis (1 satoshi = 0.00000001 BTC).
At first glance, Bitcoin exhibits all the properties of a currency. However, this doesn’t guarantee its success. A currency must inspire trust and, above all, be useful to succeed. Both aspects are intricately linked.
To instill confidence, Bitcoin must convincingly assure its users that they can exchange their Bitcoins for goods and services at any time.
Users of a currency form part of an extensive exchange network, and the value of this network increases with the number of people involved. Hence, for Bitcoin to be genuinely useful, it needs wide acceptance.
Bitcoin, like all currencies, has an abbreviation (EUR for Euro, CHF for Swiss Franc, etc.). It’s often denoted by the abbreviation BTC, although XBT is also used to refer to the primary cryptocurrency. This financial designation, while unofficial, aligns with the prevailing system in financial markets. Therefore, in “XBT,” “BT” represents Bitcoin, and the “X” prefix indicates that this asset doesn’t belong to any country, similar to the “X” in “XAU,” signifying gold.
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What can you buy with Bitcoin?
Several countries have officially recognized Bitcoin as a mode of payment, such as Japan in March 2017. In Japan, the cryptocurrency is highly popular, and Bitcoin payments are relatively widespread. However, this isn’t the case universally.
In France, few merchants accept payment in Bitcoin. Most businesses that do accept it are online. E-commerce sites like Overstock or Shopify, for instance, accept Bitcoin payments. The blogging platform WordPress also acknowledges Bitcoin. However, there are a few physical stores where you can spend your Bitcoins. Note that in France, these are almost exclusively located in Paris.
Hence, you can purchase computer equipment, software, everyday consumer products like furniture, decor items, clothing, etc., using Bitcoin.
You can find a list of all French stores accepting XBT payments on bitcoin.fr.
Since 2021, PayPal offers its users the option to pay for purchases via its platform using Bitcoin (and other virtual currencies).
What does a Bitcoin payment method look like?
A Bitcoin consists of a private key and a public key. The public key comprises 34 alphanumeric characters beginning with “1” or “3,” such as 15VjRaDX9zpbA8LVnbrCAFzrVzN7ixHNsC. The private key functions as an electronic wallet, and it remains anonymous.
The private key consists of 51 alphanumeric characters starting with the digit 5. This key is necessary for transferring Bitcoins to another user on the network.
How to buy Bitcoin?
Are you wondering where to buy Bitcoins or how to do it? There are several ways to acquire Bitcoins, which we will detail here.
You can either buy Bitcoins by exchanging a currency (euro, dollar, etc.) for Bitcoins, or offer goods or services for sale, setting their price in Bitcoin.
In any case, you’ll need to create a cryptocurrency wallet to hold your Bitcoins. This raises the question of which cryptocurrency wallet to choose. Which Bitcoin wallet to choose? Which site to prefer for holding your Bitcoins? This question is significant, considering the hacks or bankruptcies that have affected many players in the industry.
To keep your Bitcoins, you’ll need a wallet, which is an address presented as a series of numbers accessed with a password. The address and password can be created for free and easily on a dedicated platform, such as BitAddress.org or Cryptanor.
However, to pay or receive a cryptocurrency payment, you’ll also need to either download software or use an exchange platform.
Lastly, for making payments with cryptocurrency (or receiving payments in cryptocurrency), an intermediary is necessary. You have the choice between an exchange platform similar to a broker or software to download.
How to pay with Bitcoin?
There are three ways to pay with Bitcoin, whether it’s for buying a good or a service.
Firstly, you can use the QR code provided by the seller. You’ll just need to scan it with your smartphone, which will automatically open your Bitcoin wallet application. Then, you’ll need to validate the payment by verifying the sending address and the amount.
Alternatively, you can pay an online merchant on your computer by clicking “pay with Bitcoin.” In this case, your wallet will open automatically. Again, you’ll need to verify the recipient’s address and the amount before confirming your payment.
Finally, you can also choose to manually make a payment. You’ll have to open your online wallet and copy the merchant’s address into the “send to” or “recipient” field, specifying the amount in XBT for the transaction before sending your payment.
Why buy Bitcoin?
As seen, payments with Bitcoin are relatively limited, and few merchants accept exchanging goods or services they offer for Bitcoin. So, why invest in Bitcoin? What interest does Bitcoin offer? How does Bitcoin gain value? Why did Bitcoin explode? Here, we explain the reasons to buy Bitcoin and how to make money with Bitcoin, while keeping an eye on the risks.
Certainly, Bitcoin can be exchanged worldwide, via any computer or smartphone, without any banking intermediary since specialized exchange agents convert bitcoins into traditional currencies, including the euro and the dollar. This makes it an international and independent means of payment. Cryptocurrencies represent an alternative payment method based on blockchain technology with all the advantages it entails (traceability, security, etc.), which constitutes a significant advantage. However, this isn’t the sole reason for the surge in prices.
Next, let’s underline that Bitcoin can serve as a safe haven in times of crisis and in countries where the currency is frequently subject to devaluation. Thus, the Chinese government’s policy regarding controlling the outflow of funds from Chinese nationals and the continuous decline of the Yuan have significantly contributed to Bitcoin’s success in the Middle Kingdom.
But if Bitcoin is so popular, it’s primarily because of the potential for significant and rapid profit. Indeed, the excitement surrounding this valuable token is primarily based on speculation without the intrinsic value truly factoring into its valuation. It’s worth mentioning that Bitcoin’s volatility and significant long-term rise are tempting for traders.
How to invest in Bitcoin without buying it?
Thanks to Bitcoin’s popularization in the financial world, solutions for stock market products have emerged to allow investors to invest in Bitcoin without actually buying BTC. Therefore, you can now use stock market products such as ETFs, certificates, options, futures, turbo warrants, etc., to position yourself on Bitcoin price movements.
In this case, it’s purely an investment, and it won’t be possible to use Bitcoin as a means of payment. Some investors will find these solutions a simpler way to speculate on the rise (or fall) in Bitcoin prices, while purists will certainly prefer to directly buy Bitcoins and hold them in a wallet.
Bitcoin price: the main developments to note since its creation
You might wonder how much Bitcoin is worth? How much profit does Bitcoin yield? How many euros are exchanged for one Bitcoin? Discover the evolution of Bitcoin prices since its creation and our study of its variations over 5 years and 1 year.
The first exchange of 10 Bitcoins between Satoshi Nakamoto (its creator) and Hal Finney dates back to January 12, 2009. On October 5, 2009, its value was estimated at $0.001.
On June 10, 2019 (10 years later), its value is $9,000. Less than two years later, in April 2021, the price of Bitcoin reaches a first-time high of $65,000 USD, a value multiplied by 7.
Following this historic high, Bitcoin prices experienced a significant correction to $30,000 USD in June 2021. Before the end of 2021, prices surged again to surpass the previous high and reach $68,000 USD.
The period that followed, termed the “crypto winter,” saw Bitcoin’s price register a drop of over 75% of its value, settling around $16,000 USD. The end of the strong bearish trend for BTC was observed in September 2023, even as the Bitcoin price crossed back above $30,000 USD.
Despite the significant drop between November 2021 and November 2022, Bitcoin still shows an almost +380% performance in 5 years, rising from $8,000 USD to $38,000 USD.
Reminder: it’s important not to overlook the volatility of cryptocurrency investments. Therefore, be aware that past performance is not an indicator of future performance. The value of your investments may fluctuate significantly.”
Since the beginning of 2023, Bitcoin has shown a performance increase of +132%, rising from $16,548 on January 1, 2023, to $38,295 on November 24, 2023.
Over a rolling year, Bitcoin experienced several major phases:
- A surge from $16,600 to $31,000 from January 2023 to April 2023.
- A decline from $31,000 to $24,800 from April 2023 to June 2023.
- A rapid recovery reaching $31,600 during the fourth week of June 2023.
- A drop in Bitcoin’s value, returning to $25,500 between July 2023 and early September 2023.
- A robust upward trend, rising from $25,500 to $38,000 from September to November 2023.
Bitcoin Price Movements: What Are the Recent Factors Contributing to Increases and Decreases?
Various factors contribute to the rise or fall of Bitcoin, notably including regulatory changes and the challenges faced by key players in the crypto sphere, particularly interactions with the SEC, which have significantly influenced markets in recent months. It’s challenging to overlook financial scandals involving certain entities. For instance, FTX’s bankruptcy, the world’s second-largest exchange platform behind Binance before its liquidation, caused by irresponsible management and fraud by its founder, Sam Bankman-Fried (known as SBF), had considerable repercussions on the markets. Similarly, the recent difficulties of Changpeng Zhao, Binance’s CEO, who resigned and pleaded guilty in November 2023 to accusations of violating US money laundering laws, seemingly saved Binance. He stated he was acting “in the best interest of our community.” Expectedly, this honorable resolution in the Binance matter had less impact on the crypto market than the FTX scandal.
However, positive market news can also contribute to token increases, such as the democratization of cryptocurrencies with the imminent creation of a physical BTC ETF, which significantly boosted Bitcoin from mid-October 2023, influencing the entire cryptocurrency market.
Bitcoin price: what are the Bitcoin cycles?
Similar to stock markets adhering to stock cycles, the cryptocurrency market also operates on cycles, with Bitcoin being the instigator. Altcoins tend to follow the lead of Bitcoin in these cycles.
The cycle often starts with Bitcoin’s halving, initiating the bull market phase, signifying an increase in Bitcoin and other cryptocurrencies’ prices (referred to as altcoins). This phase lasts approximately 1.5 years and culminates with Bitcoin’s All-Time High (ATH). The ATH is followed by a crash, a decline in prices leading to a bear market characterized by market consolidation and lower prices. The lowest point is usually reached 1 year to several months before the halving. Despite other factors that may somewhat disrupt these cycles, they remain a fundamental basis for crypto investments, even with potential fluctuations in their duration.
Bitcoin price: what are the indicators to follow?
Additionally, current Bitcoin prices suggest accumulation according to the rainbow chart indicator. The fear & greed index leans towards greed as of late November 2023. Optimism prevails in the crypto market toward the year-end, with the much-anticipated Bitcoin spot ETF expected soon and the approaching date of the halving.
As the Bitcoin halving, which reduces supply, is scheduled for April 26, 2024, it is anticipated to cause a significant rise in the cryptocurrency.
Investment Timing: Is it the Right Moment to Invest in Bitcoin?
Considering investment timing in Bitcoin can be uncertain. Whether you believe it’s too late due to its already high price or still early due to its relatively low penetration into the real economy, avoiding an investment solely based on market timing is advised. Predicting the exact course of this highly volatile asset’s prices in a month, a year, or even two is impractical.
However, with a long-term investment horizon, cycles are expected to continue, potentially allowing capital appreciation over time. Implementing a Dollar Cost Averaging (DCA) strategy, where you invest the same amount consistently, or a dynamic dollar-cost averaging approach, investing more when Bitcoin prices are low (during bear markets) and less when prices are high (during bull markets), could be considered.
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How to Invest in Bitcoin?
If you’re considering the adventure of investing in XBT (Bitcoin) and want to proceed, consider diversifying your investments and using money you don’t rely on for essential needs.
Wondering how to invest in Bitcoin in France? Where to invest in Bitcoin, which platforms, and through which brokers? For investing in this virtual currency, two options are available: direct investment by exchanging euros for Bitcoins through specialized platforms like Poloniex, Circle, or Coinbase. Alternatively, you can speculate on Bitcoin via derivative financial products based on the most famous virtual currencies. Several online brokers offer CFDs (Contracts for Difference) on Bitcoin. Online brokers like eToro, IG, or XTB enable investment in Bitcoin through a CFD on the digital currency. Since June 2021, it’s also possible to invest in Bitcoin via listed index products on the Euronext Paris. Companies like VanEck, 21Shares, ETC Group, and WisdomTree offer ETPs (Exchange Traded Products) on Euronext Paris to gain exposure to Bitcoin or Ethereum. French individual investors can thereby engage in the price movements of Bitcoin and Ethereum without directly purchasing them, utilizing ETPs, which are financial products similar to ETFs.
However, before investing your savings in cryptocurrency, consider how much to invest in Bitcoin. Practicing caution in investments and diversifying your assets remain essential for managing a portfolio, especially considering Bitcoin’s highly volatile nature. It’s advisable to invest only funds you can afford to lose. Moreover, the use of derivative products and leveraged products is recommended for more experienced investors who can comprehend their functionality and associated risks. According to a study by the French Financial Markets Authority based on the results of nearly 15,000 French individual traders from 2009 to 2013, 89.4% of individual traders lose money when trading CFDs and Forex.
How to Sell Bitcoin?
For investors in Bitcoin who have directly positioned themselves in BTC without using derivative products from a stockbroker like eToro, ensuring liquidity is crucial when selling your Bitcoins and realizing potential gains.
One way is to sell your Bitcoins on an exchange platform such as Kraken, Coinbase, or Bitstamp. After selecting a platform (pay particular attention to fees and specific conditions such as minimum deposits) and creating your account, you can place a sell offer, indicating the currency in which you want to receive your funds. Once someone is interested in your offer, the platform will automatically facilitate the transaction. Subsequently, you can transfer the funds to the bank account provided during registration.
While less common, it’s possible to sell Bitcoins through a physical exchange platform like Coinhouse in Paris or some Bitcoin ATMs (more prevalent in Asia). For this, you’ll need your identification and smartphone to send your XBT to the physical platform’s wallet via a QR code. Then, you’ll receive your euros in cash or through a bank transfer.
Another method is to sell your Bitcoins directly to another person provided they already have a wallet. To sell your XBT, you’ll only need to scan a QR code, enabling you to transfer the sold Bitcoins to the buyer’s bitcoin wallet, all within seconds.
Taxation for Bitcoin?
Since the 2019 Finance Law, French residents are obliged to calculate and declare their taxable gains from cryptocurrencies alongside their income tax declaration. If you hold Bitcoins, be mindful that tax authorities are vigilant.
When will you be taxed? How? Capital gains on digital assets are now subject to a flat tax of 30% (flat tax) or the income tax scale plus 17.2% in social security contributions if more advantageous for you. The taxation occurs when converting against a legal tender currency, exchanging for a good (other than a digital asset), service, or exchanging with consideration against another digital asset. The taxable event is the transaction within the wallet (not the transfer of funds to a current account, for instance). The official text from BOFIP specifies that “taxable operations are sales for consideration of digital assets, or rights related to them, carried out since January 1, 2019, in consideration of: legal tender currency; the exchange of a good other than a digital asset; a service; the exchange with consideration of a digital asset. Exchanges without consideration are considered intercalary operations benefiting from a deferral of taxation; therefore, they do not generate taxation.”
Additionally, there is now a reporting obligation for any accounts (holding digital assets) held abroad to the Tax Administration (neobank accounts like Revolut are part of this) as per Article 1649 bis C of the CGI.
Is Bitcoin a Threat to Euro or Dollar Currencies?
It’s unlikely. However, the growing importance of this new kind of currency, extending to asset management, is evident. Crypto-assets are now a distinct asset class.
More than Bitcoin itself, it’s the collective virtual currencies that could eventually compete with traditional currencies. Even though Bitcoin’s price is high and its market capitalization makes it the leading encrypted currency, Litecoin or Ethereum appear better equipped to challenge traditional currencies. Nevertheless, the future of virtual currencies might lie in experiments initiated by pillars of the global monetary and financial system, such as the Banque de France, which launched a Central Bank Digital Currency (CBDC) in 2020. This French experiment could potentially serve as a reference for the potential launch of a digital euro. Notably, Christine Lagarde, President of the European Central Bank, has expressed a relatively favorable view.
Bitcoin: What Lies Ahead for This Digital Currency?
While Bitcoin is not yet predominantly used in our everyday lives for daily purchases or personal finances, this cryptocurrency remains deeply ingrained in the financial landscape.
As a legitimate asset, Bitcoin serves as a value whose prices move alongside major global stock indices.
Bitcoin has already conquered stock markets, some management companies, and even certain countries like Venezuela. It’s almost certain that it’s here to stay. But at what cost?
While some purists still believe Bitcoin could become a global currency replacing the US Dollar, others are more cautious, seeing Bitcoin as a digital store of value. Often compared to gold, it could establish itself as a digital standard, a sort of guaranteed value for the entire crypto ecosystem.
Considered impervious to economic fundamentals, the substantial drop in Bitcoin prices in 2022 demonstrated that virtual currencies are now sensitive to the rise and fall of central bank interest rates. This situation is almost ironic given the initial purpose of this financial innovation.
In recent weeks, Bitcoin prices have significantly surged due to the anticipation of a physical ETF on Bitcoin, which would position Bitcoin as a regular financial asset. This kind of approval by the financial sector of an asset created to combat its own misgivings and as an opposition to this sector indeed raises questions. Nonetheless, investors or rather speculators are enthusiastic and welcome the creation of a financial vehicle that could bring billions in liquidity to BTC. According to a study by Galaxy Digital Research published on Tuesday, October 24, 2023, Bitcoin prices could increase by 74% in the first year following the approval of a Bitcoin ETF.
Investors are also closely monitoring the cryptocurrency cycle, with an All-Time High (ATH) far superior to the previous cycle consistently observed. In any case, optimism prevails at the end of 2023 for Bitcoin and other cryptocurrencies. The bull run seems to have started earlier than anticipated.
Most Bitcoin investors anticipate a symbolic price of $100,000 for Bitcoin in the coming months or years. However, a few prominent investors are far more optimistic, such as Cathie Wood, who initially bet on Bitcoin reaching $500,000 and now envisions Bitcoin at a million dollars. Yet, it’s difficult to anticipate if Bitcoin’s price will reach this level and, if so, when.
Challengers to Bitcoin: Other Cryptocurrencies in Bitcoin’s Wake
The cryptocurrency market is undeniably dominated by Bitcoin, both as the first cryptocurrency in terms of time (it was created first) and in terms of users or market capitalization. Bitcoin’s dominance, or BTC dominance, reached over 51% in November 2023. This means that Bitcoin represents nearly half of the entire cryptocurrency ecosystem.
However, many cryptocurrencies have emerged alongside Bitcoin. Perhaps you’re hesitating between investing in Ethereum or Bitcoin? Bitcoin or Litecoin?
We strongly advise investing in the most robust virtual currencies that have proven themselves and already have a significant user base. To minimize risks, it’s better to limit yourself to the 10 or 20 cryptocurrencies with the largest market capitalizations. Alternatively, you can choose those with less volatile prices. Those less averse to risk might invest in a few riskier projects that seem promising but are still in the early stages.
Finally, invest in these assets only if you genuinely understand their nature and why investing in Bitcoin or Ether may be more beneficial than in Bazaars or Pepe. Although most virtual currencies are based on blockchain technology, there are significant differences among them, such as token expansion limits or block generation durations. It’s crucial to consider these differences when selecting virtual currencies that you believe have the most potential.
