What was initially feared to be a long, protracted winter for cryptocurrency has turned into something of a false dusk, as the cryptocurrency market has rallied and kept surging towards prices that were once seen as absolutely unfathomable.
As of late November 2024, Bitcoin reached $94,000, putting it exceptionally close to a fabled $100,000 valuation previously considered to be unfathomable even during the famed early 2020s bull run.
The benefits of this for crypto card users are pretty substantial, even those who are neither investors nor speculators; huge surges in prices bring in other investors, which provides liquidity to exchanges.
There are a lot of reasons for this, with the most notable of these being the approval of spot Bitcoin exchange-traded funds (ETFs) in January 2024, giving investors a way to buy into the crypto market without requiring a wallet or to use the currency directly.
This has legitimised what was perceived as a parallel market, and the SEC-approved assets mean that Bitcoin, and by extension, the blockchain and decentralised finance as a whole, have a level of legitimacy that has not been seen before, with implications that have yet to have been reckoned with.
The United Kingdom has set out a roadmap to regulate crypto assets by 2026.
However, does the astonishing Bitcoin rally actually begin with its lowest point in years, where a currency valued at close to $70,000 went down to under $20,000 in less than a year amid an existential crisis for the entire industry?
Exposure Therapy
Because cryptocurrency in general and Bitcoin in specific are both relatively new, they have been prone to market volatility in the past as early investors work out whether they are holding a speculative asset, digital gold or the future of money.
The idea of Bitcoin climbing, falling precipitously before bouncing back even stronger is a fairly familiar tale at this point. As early as 2011, Bitcoin rose from $1.06 in February to $29.58 in June, before falling back down to $2.11 in November.
There were similar stories with higher sums in 2015 and 2018, but the start of the climb towards $100,000 for Bitcoin arguably began with the November 2021 peak of Bitcoin at $67,566.83.
This was in the wake of news that the small Central American nation of El Salvador was to accept Bitcoin as legal tender and set up a government-approved wallet so that people and businesses could use crypto and it would need to be legally accepted.
It looked like the cusp of a financial revolution alongside digital art assets, the almost limitless possibilities of the blockchain and the development of systems such as proof of stake verification that made a lot of crypto transactions (although not Bitcoin) more sustainable at large scales.
And then April 2022 happened.
Bitcoin had already fallen in value by $20,000 in just two months between November 2021 and January 2022, but an announcement that the Securities and Exchange Commission would start to regulate the crypto market led to a rather stark domino effect.
Bitcoin fell to under $30,000 within a month, and then below $20,000 by June, whilst one of the biggest stablecoins on the market at the time, TerraUSD, lost its peg, collapsed and sent shockwaves throughout the entire market.
Celsius collapsed, and BlockFi would have done the same had fellow exchange FTX not stepped in to save it, and several investment and hedge funds in the space filed for bankruptcy after facing liquidity crises.
FTX themselves declared bankruptcy, leading to a criminal investigation that sent its owner, Sam Bankman-Fried, to prison for 25 years.
However, as also happened with the dot-com bubble, the chaotic events also served as a form of exposure therapy, where the market was exposed to the worst-case scenario to develop resilience in the market, purge bad actors and reform cryptocurrency as a much stronger financial sector.
None of this is necessarily new to crypto and has happened since at least 2011, being an evolution of the Silicon Valley wisdom of moving fast and breaking established conventions.
In a 21st November article for The Independent, Fiorenzo Mangineiello of the LIAN Group boldly claimed that late 2024 would mark a “watershed moment of stability” and the end of bull and bear market cycles.
Whilst this is unlikely to be true, as has been proven in any case when economists have claimed the end of boom and bust, it is clear that the lowest and most chaotic point in Bitcoin’s recent history might also have been the catalyst to not only boost its value but also make it sustainable.