After speculation following some incredible near misses, Bitcoin has finally hit a milestone that went from being impossible to inevitable, bringing up every crypto wallet in the process.
Reaching a peak of $103,500 in the early hours of 5th December 2024, before falling to the mid $90,000 range, Bitcoin’s rise has become the capstone to a year that has seen an astonishing bull run for the cryptocurrency market.
From the SEC approval of spot Bitcoin ETFs in January up until now, the resurgence of crypto following a difficult few years in the shadow of the collapse of FTX is something that has been truly remarkable.
However, to truly understand how it happened, and how a valuation once seen as an idealistic meme became an inevitability, it is worth looking back to the beginning of crypto as we know it, explore how it broke out, how it boomed and busted and what changed to make it go from worthless to worth over $100,000.
A Dream To Democratise Finance
Whilst the origins of cryptocurrency technically go all the way back to David Chaum and his proposals for untraceable blind signatures that would outline every element found in crypto besides its cryptographic verification system, the true beginnings of cryptocurrency lie in 2008.
Despite the many early electronic currencies that predate 2008, from Mr Chaum’s own eCash, to e-gold, Liberty Reserve and Tencent’s QQ coins in China, this was the year when the financial world failed on a scale never seen before with ramifications still felt in into 2025 and beyond.
The global financial crisis and the Great Recession which followed it was the result of a complex web of perverse incentives, predatory lending practices and increasingly risking investment practices, epitomised by and culminating in the rise and fall of mortgage-backed securities, which led to the fall of Lehman Brothers.
The extremely expensive rescue and bailout of the banks that caused the crisis in the first place under the belief that they were “too big to fail” was not exactly a popular position for the billions of ordinary people who would ultimately foot the bill, and several small but growing groups of people worked on an answer to fix a rotten financial system.
This included an enigmatic cryptographic developer known as Satoshi Nakamoto, who used the blockchain system in combination with Mr Chaum’s cryptographic currency system and the proof-of-work verification system typically used in spam prevention to create Bitcoin.
Whilst the full motives of Mr Nakamoto cannot be gleaned from the limited information found in Bitcoin hashes, the white paper and correspondence he is confirmed to have had from 2009 until he left the project in 2010.
At the time, the goal was to have a medium of exchange, a unit of account and a store of value.
In other words, the goal was an alternate currency that could be operated outside of a banking system that had fallen apart.
It was part of a range of systems that could be grouped together as “decentralised finance”. The idea was to have a digital banking system that did not require banks, exchanges or brokerages outside of initial access to the token of exchange in the first place.
It appears as if it was meant to work more like digital cash or digital gold where it could be used primarily for barter and transactions between individuals without intermediaries.
Ultimately, if this was the goal, Bitcoin did not succeed as a digital currency; its volatility and slow transaction times in the early days made it impractical, and there were many early stories of shops accepting crypto, only to hand the terminal back to the customer because the valued dropped during the transaction stages.
Whilst a digital storefront, Steam’s announcement in 2017 as to its withdrawal of Bitcoin as a payment option reflects the issues with Bitcoin in specific and crypto more broadly as a way to pay for goods and services, but that increasingly stopped being the purpose.
Bitcoin became increasingly used as a speculative asset or exclusively as a store of value; the price reaching six digits is proof of its success not as digital cash but as digital gold.
Whilst this is fairly accepted now, the signs were clear from the beginning that this was going to be the case and it would form a parallel market similar to gold and other precious metals. This meant it was used less as a currency and more as a hedge.
It also would, through increasing regulation, no longer be separate from the banking system but
instead a not insubstantial part of it.