Many people think that such a hype around bitcoin in 2017 rose due to the fact that it rose in price to$ 20,000 and because everyone wanted to get rich quickly. Now I will try to prove that this is only a consequence, not the cause of its growth. I will write as briefly as possible and in simple language, but to understand in detail you will need to additionally Google.
First, you need to explain why bitcoin is constantly growing in price, though with sharp collapses. As we know from the law of supply and demand, the price is set at the point of equilibrium between supply and demand. It is also known that there can be only 21 million bitcoins and "new" bitcoins appear on a pre-programmed code that can not be changed(details in Google). In other words, the supply is initially limited, but the demand is constantly growing, because more and more people are getting acquainted with the idea of bitcoin and blockchain. And then you need to get acquainted with the law of Metcalf. According to this law, an increase in the number of users of a communication network leads to an exponential increase in its value.
So, at the beginning of 2017, BTC cost $ 900. In April, there was news that in Japan, bitcoin is recognized as a means of payment(!).
In parallel, alternative cryptocurrencies (altcoins) and tokens on the Ethereum platform began to develop rapidly - this is the 2nd largest cryptocurrency by capitalization at that time. At the beginning of the year, the total capitalization of all cryptocurrencies was about $ 20 billion. Of these, almost 90% came from bitcoin. But in the spring of 2017, everything changed. The dominance of bitcoin rapidly began to fall and by the summer the capitalization of bitcoin was already 40% of the rest of the market. The fact is that the so-called ICO began to be held on Ethereum - this is the initial placement of tokens, that is, the appearance of many new blockchain startups. A new, previously non-existent, with its own characteristics economy was born. It sounds pretty loud, but I didn't formulate it. On the official YouTube channel of VEB there is a corresponding video "BLOCKCHAIN-the BIRTH of a NEW ECONOMY, SPIEF 2017". I think for adequate people it will be a powerful argument that Ethereum should not be compared with pyramids, such as cashberry or mmm. I personally spoke with Buterin(the Creator of Ethereum) at one of the lectures at the HSE. I can say that he is, to put it mildly, a peculiar person) he clearly does not think about how to get rich quickly, he is completely absorbed in his idea. Vitalik is developing a system that can be used in many areas of humanity and co-ordinally change them, removing intermediaries between people, thanks to the features of the blockchain.
So ICO is an analogue of IPO in the traditional market. Since the cryptocurrency market IS still unregulated, it is natural that many scammers appeared on it. And now it is already obvious that 90-95% of all startups that were launched on Ethereum are either fraudulent or will never find a practical application. In order to get the newly minted tokens, it was necessary to buy ether, which led to a sharp increase in the price of it. So the bubble was formed, the deflation of which we are now witnessing. Ether rose from $ 10 to $ 1500, and now fell to $ 85.
It is worth noting that, firstly, ICO is not the only possible use of Ethereum, and secondly, promising tokens were released on Ethereum, which will definitely have a practical application. I will tell you more about these startups in other posts.
Back to bitcoin. In the summer of 2017, the first major update in the bitcoin network occurred. The so-called SegWit, which increased the bandwidth of the blockchain and paved the way for the Lightening Network(I'll omit the technical details, everything is in Google). And there were rumors about the appearance of the first futures on the Chicago stock exchange CBOE and CME. And here the bubble has already inflated on bitcoin. In my opinion, people overestimated the significance of this event and bitcoin literally soared in 3 months in the price of 3-4 times. Which caused it to collapse as quickly as it had grown. In the last post, I just told and gave examples of the formation of bubbles in new markets. I also wrote about the fact that markets are cyclical. At the moment, all those who wanted to get rich quickly, not realizing what bitcoin is, left the market in panic and disappointment, only losing their money.
But apart from the price, or rather short-term demand, nothing has changed. The same Lighning Network is still growing and developing, according to the same law of Metcalf. Ethereum is still a crude system, it has a lot of updates ahead that will significantly increase the throughput of the blockchain.
I want to say that it is not necessary to look at prices in the first place. Course changes are just the psychology of crowd behavior and various manipulations in this new and yet unregulated market.
In the following posts, I will talk about various promising and interesting projects using blockchain, so that everyone can imagine how this technology can change the world. And I will also tell you why bitcoin can start its new rapid growth next year. All the most interesting things are ahead. The growth of the capitalization of cryptocurrencies in 2017 from $ 20bn to $ 800bn is only the beginning of the development of this market. In a few years, it may well be more than a trillion dollars.
More https://www.youtube.com/channel/UCmYpavSD9aALIt_lhde2Ewg?view_as=subscriber
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