Bitcoin Bubble - Bloodbath before Christmas

Bitcoin (BTC) saw its bloodiest week before Christmas when it lost it's market capitalization by almost 45 percent or $144 billion in the wipeout. After reaching a high of $20,000 per BTC on Sunday, it started its downward spiral fuelled by frantic investor sell-off and bottomed out at $12,149 by Friday. After reaching those levels, it has started its upward trend again and is now valued at approximately $15,154 as on the day after Christmas. 

For those who aren’t aware, Bitcoin is the world’s first decentralized crypto-currency held online, which means that there is no central bank or regulatory body for its oversight. ‘Satoshi Nakamoto’ using the block-chain technology first released it in 2009, and transactions are recorded in a public distributed ledger using peer-to-peer technology, which made it impossible to fraud transactions using this currency. In addition, the inventor developed it in such a way that there would only ever be 21 Million bitcoins in circulation, thereby creating ‘artificial scarcity’ and monetary policy for bitcoins. Till date, 16.8 Million BTC has already been mined and it is estimated that it will reach its limit of 21 million BTC by 2140.

There have been miles of paper written about ‘Satoshi Nakamoto', but till date, nobody actually knows if it is an individual or an organization. Many individuals have been suspected to be the inventor of bitcoin like Nick Szabo who is a decentralized currency enthusiast and had published a paper on ‘bit gold’. Other suspects included Dorian Nakamoto who was a Japanese American, Hal Finney who was the first person to use the software after Nakamoto, and Craig Steven Wright, an Australian academic, who claimed to be the inventor but was later proved to be an elaborate hoax.

As on date, the total estimated market capitalization of crypto-currency is valued at approximately $600 Billion. Until 2012, bitcoin dominated the crypto-currency market without any alternatives, but with the entry of other crypto-currencies like litecoin, ethereum, dash and others, it’s dominance in the total crypto-currency market capitalization started falling rapidly and by June 2017, it’s dominance fell from 95 percent to only around 39 percent followed closely by ethereum at 31 percent. But post-June, bitcoin again started gaining ground over other currencies and reached a high of 65 percent dominance by December 7, 2017. As on date, it's dominance stands at 44 percent of total crypto-currency market capitalization.

The value of each bitcoin at the beginning of 2013 was approximately $14, but by end of December 2017, it reached a peak of $20,000 turning individuals like ‘The Winklevoss Brothers’ into billionaires. The Winklevoss brothers had started purchasing bitcoins in 2012, and had bought around 120,000 BTC for $11 Million, and which is now valued at approximately $1.3 Billion.

It is to be seen if the crypto-currency bubble continues, or legislative steps are taken to control or ban trading of this currency since multiple reports have emerged of its use as a medium for criminal exchanges and illegal transfer of funds.