Bitcoin's 12-Year Evolution: From a Product of the Financial Crisis to a New Favorite for Institutional Investors

Bitcoin, as a decentralized blockchain currency, was born after the financial crisis in 2009. Satoshi Nakamoto's original intention in creating Bitcoin was to challenge and reflect on the centralized monetary system. After 12 years of development, Bitcoin has become a financial phenomenon that cannot be ignored. As stated by a large bank, a phenomenon that has lasted for 12 years cannot simply be regarded as a bubble.

Recently, the consensus on the value of Bitcoin has been expanding, attracting a lot of attention. On January 8, 2021, the price of Bitcoin broke through the $40,000 mark, reaching a historic high of $41,940, doubling in value in just over a month. A week later, Bitcoin hit the $40,000 high again, and this repeated setting of new highs greatly boosted market confidence.

According to statistics from a data platform, as of January 20, the price of Bitcoin fluctuated around $35,000. This price volatility is expected and aligns with the characteristics of the Bitcoin market. Due to its decentralization and anonymity, the trading range of Bitcoin is broader. Data shows that the daily average volatility of Bitcoin is 3.75%. It is worth noting that on March 12, 2020, Bitcoin experienced an extreme market situation with a single-day drop of over 50%.

Unlike the bull market in 2017, which was mainly driven by retail investors, the new round of increases that began at the end of 2020 is more driven by institutional investors. Large transfer data can support this point. On January 12, two large transfers were monitored, namely 9060 BTC (approximately $327 million) and 17283 BTC (approximately $616 million). Between January 11 and 15 alone, 65 large Bitcoin transfers were monitored, of which 19 were from anonymous wallets, transferring a total of 92201 Bitcoins, worth approximately $3.5 billion.

As of January 15, 2021, there are a total of 100 Bitcoin addresses worldwide with a balance exceeding 10,000 BTC, which hold 13.6% of the circulating Bitcoin supply. If we also include addresses holding 1,000-10,000 BTC, then only 0.00695% of Bitcoin addresses globally own 42.5% of the Bitcoin. This indicates that the holding structure of Bitcoin is changing, with institutional investors alongside long-term holders becoming an important force influencing the market.

The core advantages of Bitcoin lie in its security and scarcity. From the underlying logic to the overall architecture, the design of Bitcoin aims to strengthen the trust mechanism. Theoretically, only those who control more than 51% of the computing power can crack the Bitcoin network, and the countless failures of attacks over the past 12 years have proven its security. Although a major exchange was hacked in May 2019, resulting in a loss of 7,000 Bitcoins (approximately $41 million), this reflects more on the importance of private key management rather than a security issue with Bitcoin itself.

The scarcity of Bitcoin is another major characteristic. Its total supply is limited to 21 million, and it is expected to stop mining by the year 2140. This artificially set scarcity gives Bitcoin advantages over gold in certain aspects, especially in terms of transaction convenience. It is worth noting that due to reasons such as lost private keys, approximately 3.7 million Bitcoins (accounting for 20% of the circulating supply) are currently considered permanently lost, further increasing the scarcity value of the existing Bitcoins.

The high volatility of the Bitcoin market stems from its characteristics of decentralization and anonymous transactions, which makes it a truly free market determined by supply and demand, unrestricted by the fluctuations or circuit breaker mechanisms that constrain stock markets.

Currently, mainstream financial institutions have a polarized attitude towards Bitcoin, and the debate continues. Some are concerned about regulatory risks, while others predict that stablecoins may replace Bitcoin, but these views remain to be validated.

After 12 years of development, Bitcoin has proven its resilience. Although various external factors may have a significant impact on it, these factors more highlight the value of Bitcoin rather than determining its existence. Time will continue to test the value and potential of Bitcoin.