Lessons From Bitcoin’s History

Welcome to another episode of the Crypto for Newbies series. Previously, we explored the pros and cons of cryptocurrency. In this episode, we’ll look at the trajectory of one cryptocurrency from inception to date. Just to get a sense of what it’s like to invest in crypto. What better crypto to examine than the granddaddy of them all? 

Bitcoin’s trajectory

Bitcoin investors have had a roller coaster ride during the last 13 years. Apart from day-to-day ups and downs, they have dealt with a slew of issues polluting its ecosystem. This includes scammers, fraudsters, and a general lack of regulation. All these add to its volatility.  

After the 2008 financial crash, Satoshi Nakamoto (Bitcoin’s creator) created this cryptocurrency to be used for daily transactions. It was intended as a way of sidestepping the regular banking infrastructure.  

Unfortunately, cryptocurrency is not yet widely accepted as a form of currency. Instead, it has gained popularity as a store of value and a buffer against inflation. 

When bitcoin was first created in 2009, it was practically worth $0 in terms of value. It was initially given away for free to early adopters. 

“Back then everyone practically gave BTC away for free or for way less than what people sell them for today.” – Bitcoin.com  

But in July 2010, Bitcoin began trading from roughly $0.0008 to $0.08 per coin. 

On April 14, 2021, Bitcoin achieved a high of almost $64,000 followed by a drop by half, to $32,000, and another spike on November 5, 2021, to $68,521 (bitcoin’s all-time high). 

The future of bitcoin differs depending on who makes the prediction. According to the first Snapchat investor, Jeremy Liew, bitcoin might hit $500,000 per coin by 2030.  Others predict a ten-year bottom in value. 

The lesson learned

A popular saying goes, “history is a mirror to the future”. Learning about bitcoin’s past can help us predict a possible future. If anything, its past has shown how unstable the crypto market is.  

It also shows that the winners are those who play the long game. People who invest and wait for a long time before taking profits. Imagine how wealthy you’d be if you’d bought some bitcoin back in ‘09 and held it till now.  

Of course, another group of winners is the traders. These are people who study the patterns in charts and predict price spikes and drops. They take out their investments before a major price drop and find new cryptocurrencies to invest with the potential to blow up. 

How do I trade cryptocurrency?

Trading in cryptocurrency works in much the same way as any other form of trade.  

A high demand + limited supply = increase in value 

Low demand + unlimited supply = decrease in value 

To illustrate, let’s say you go to a store to buy a can of sardines worth 600 naira. So, you give one trading element away (fiat) in exchange for another (sardines).  

Next, let’s assume you save the sardines for a “special” occasion. The following week, you hear that the price for a can of sardines has risen from 600 naira to 750 naira. A friend approaches you with a bargain to sell your can for 700 naira. You’d gain 100 naira and your friend would save 50 naira.  

That’s a simple way to understand crypto trading. Of course, the actual trading process is riddled with nuances involving complex charts and graphs but we don’t need to get into that yet. 

The information provided in this article is intended for learning purposes and should not be regarded as financial advice. Naija.FM shall not be held accountable for any losses incurred from trades or investments gone wrong. We make no guarantees or assurances about the accuracy or timeliness of the information provided here. As each individual’s circumstances are unique, you should always consult your financial advisor for professional assistance before making a financial decision.