In early 2009, a man named Satoshi Nakamoto released the code to a “peer-to-peer electronic cash system” he called Bitcoin. Less than a decade later, one Bitcoin is now worth over $2,500 and the figure keeps rising – but what happens when that stops?
According to The Guardian, a man who bought the equivalent of $26.60 of Bitcoins in 2009 and forgot about them had made $886,000 by the time he remembered in 2013. Since then, Bitcoin’s value has climbed even steeper. The craze surrounding Bitcoin can, in part, be explained by the emerging investments in cryptocurrency, with many seeing it as the currency of the future.
However, with such popularity, Bitcoin is starting to look like an economic bubble. Bubbles can be called many, many things but the basic premise is the same. When people trade an asset at a price that’s far higher than it’s intrinsic value (the true speculated value of something based off various different factors), a bubble can form. There tends to be just one way a bubble ends: it bursts.
It isn’t a new concept. In 1637, during a crisis now dubbed ‘tulip mania’, the Dutch were in love with tulips, going as far as to trade their houses for them. When the inevitable happened, the depression led to people losing property and savings. Over tulips.
In 2008, the effects of the subprime mortgage crisis became clear and the recession that followed hit people globally. It was triggered when a housing bubble burst.
So, what would happen if Bitcoin crashed? Unfortunately, it isn’t clear. There’s no doubt a lot of people would lose their money, but it could stretch much further than that. We don’t know just how deeply ingrained Bitcoin is.
Given its value, it isn’t unlikely that it’s reached into businesses and a crash could create a shock wave on a larger scale than anticipated.
Perhaps worryingly, not much is known about Nakamoto, either. In his profile on the P2P Foundation, he said he was from Japan. However, there is speculation that Satoshi Nakamoto is a cover identity to protect its owner.
Negatives aside, Bitcoin could be a fantastic opportunity for the public to gain more control and independence. Bitcoin is peer-to-peer, meaning it doesn’t have a centralised authority (not even Nakamoto).
Whatever happens, Bitcoin will likely be around for a long time and could even help forge the future.