2017 has been the year of crypto.
This year saw the creation of more than 100 cryptocurrency-based hedge funds, a crypto market cap that surpassed half a trillion dollars, billions of dollars raised through ICOs, and the continuation of a movement to decentralize the internet.
It was the year that Bitcoin finally gained a foothold as a legitimate asset. In addition to legal classification as such in Japan and many other nations, Bitcoin and other cryptocurrencies became the basis for hedge funds and futures trading on major exchanges.
It was the year that Bitcoin was called a “fraud” as it rose to unimaginable heights. It was a year of massive profits, massive innovations, and massive volatility.
The Journey of Bitcoin
In many respects, this was a fantastic year for Bitcoin – especially for ‘hodlers’ who started the year with BTC tokens and held them. On January 1, 2017, a single BTC token was worth roughly $970. For the past couple of weeks, BTC tokens have maintained a value somewhere between $16,000 and $17,000 a pop, more than a 16-fold increase.
Bitcoin’s journey to the moon can be attributed to several factors. In Q2, Japan’s passage of its Virtual Currency Act legally legitimized Bitcoin and Ethereum as forms of payment in the world for the first time. Both coins saw a massive increase in valuation following the VCA, prompting unprecedented worldwide interest in crypto investing.
The value of BTC was driven up further with the announcement of the Bitcoin Cash fork in Q3, which essentially awarded BTC holders free money in the form of BCH tokens. The final big push came in Q4 with the announcement that exchanges CBOE and CME would be offering BTC futures trading by year’s end, a decision that did not come without its share of criticism.
In addition to a massive increase in value, it can be argued that the role of Bitcoin shifted from digital cash to digital gold, from a network functioning primarily as a means-of-payment to a storage of value to be held onto. This change in function has not come without its share of controversy – for conspiracy theorists, the fact that two-thirds of Americans have not cashed out any of the profits that have come from their BTC investments raises red flags.
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In countries like Venezuela and Zimbabwe, which both faced wide-spread economic crises this year, Bitcoin’s function as both a means of storing value and a form of digital cash acted as a safe haven for individual economic preservation. In Zimbabwe, Bitcoin was being traded at such a high rate that it was worth nearly $14,000 on Zimbabwean exchange Golix, approximately double its value in the rest of the world at the time.
The functional role of Bitcoin has also been fuel in the ever-contentious debate on how to solve Bitcoin’s scalability problem. Those in the Bitcoin community who believe that Bitcoin should be digital cash have been seeking a solution to the problem more urgently, or even arguing that the Bitcoin Cash network is “the real Bitcoin” due to its capabilities for faster transaction confirmation.
Those who see Bitcoin as a long-term investment argue that upgrading Bitcoin’s software so that the network is capable of processing more transactions at once could make the value of BTC more volatile. They believe that a faster network would increase the risk of massive sell-offs that would make Bitcoin more susceptible to market manipulation – never mind the fact that the widespread adoption for practical use that an upgrade could lead to would increase the market’s value as a whole.
Anyhow, the scalability debate eventually led to two forks in Q3: the SegWit soft fork that split BTC transactions into two segments, allowing them to be confirmed more quickly, and the hard fork that led to the creation of Bitcoin Cash.
Things got weird in Q4 when a sudden rash of BTC hard forks appeared on the horizon. It seemed that all at once, the world realized that creating a BTC-forked coin was an easy way to create a ‘pre-pumped’ coin that could be quickly sold off onto exchanges for a profit. Bitcoin Diamond, Super Bitcoin, Bitcoin Silver, Bitcoin Platinum, Bitcoin Uranium, and Bitcoin God are just a few of the hard forks that have been scheduled for late 2017/early 2018.
The announcement that the Lightning Network had run tests that successfully proved its interoperability presented yet another possible solution to Bitcoin’s scalability problem in Q4, although it will still be some time before a BTC Lightning Network can be implemented for full-fledged use.
The Rise of the Altcoin
As successful as Bitcoin was this year in terms of the rise of its valuation, the altcoin market cap as a whole rose from $2.2 billion at the beginning of 2017 to more than $350 billion at the time of writing.
Currencies like Monero, Ripple, Dash, Nem and Ethereum multiplied in value by as much as 100-fold (or more) throughout the duration of the year. Additionally, some altcoins gained legitimacy as platforms for institutional use.
For example, the Ripple network has been adopted by financial institutions around the world as a means of transferring value; Dash has been integrated as a means-of-payment into hundreds of online stores (and growing).
There are thousands of altcoins in existence already, and new ones are being created each day. The cryptocurrency market cap as a whole may have just surpassed half a trillion dollars, but an ever-expanding altcoin market indicates that this milestone could quickly be left in the dust.