5
Bitcoin at sweet sixteen

Sixteen years ago, the price of bitcoin was precisely zero

Where it all began

_{Sixteen years ago, the price of bitcoin was precisely zero. Global financial markets were in turmoil as the reverberations from the collapse of Lehman Brothers spread around the world. Banks in Europe were failing. Derivatives markets came close to unravelling. Just about every financial asset was in free fall, including even safe haven investments like gold and silver.}

_{It was against this backdrop that bitcoin was launched on January 3, 2009. Embraced by a tiny network of early adopters, the world’s first cryptocurrency had no monetary value at its inception.}

_{In its first ten months of existence (3 January, 2009 – 30 October, 2009) each bitcoin was worth less than one US dollar cent. At the time, few people were even aware that the world’s first cryptocurrency had been born, or indeed what a cryptocurrency was. Much has changed since then.}

_{After multiple bull markets and corrections, each bitcoin today is worth around $97,000, giving the world’s most valuable digital asset a market cap of $1.887 trillion.}

_{By the time you read this, the price will almost certainly have changed and probably in an upward direction, for that has been the direction of price movement during 12 of bitcoin’s 16 years of existence (the exceptions being 2011, 2014, 2018 and 2021).}

_{Timeline of bitcoin's price evolution (2009–2024)}

_{^{Source: All-time Bitcoin price chart, source:}}_{^{bitcoin.zorinaq.com}}

_{Bitcoin transactions per day (2010 - 2025)}

_{^{Source: Blockchain.com}}

_{Bitcoin’s price isn't the only thing rising; transaction volume is on the up too. The chart shows Bitcoin transaction volume since inception, and now standing at c430,000 transaction per day. It is important to note that this does not include the now meaningful volume, which is processed by the Lightning Network (more on that later).}

Obscure roots

_{Even as its use and value continue to grow, much remains unknown about bitcoin’s creation. The story behind its birth reads like ‘a good thriller novel’, writes Lyn Alden, a respected financial analyst and author of the book,}_{Broken Money:}

_{"Bitcoin, the first cryptocurrency, was invented by an anonymous person or group named Satoshi Nakamoto and released publicly online in 2009 as open-source software and a white paper that explains the concept.}

_{Satoshi claimed to be a Japanese man in his thirties, but his identity has never been verified because all of his communication was via the internet. He wrote with influences of British English, and had sleep / wake cycles according to his online activity that would presumably place him in North America, leading many to believe that he's not actually Japanese. Or maybe he's multi-ethnic.}

_{It might not even be a man. It could be a woman or a group of people. But most likely it's a man using a pseudonym. And wherever he is, he has about a million bitcoin, worth billions of dollars now, which he has never spent.}

_{And he has gone dark. After having invented the concept, he no longer leads it and his whereabouts and identity are unknown."}

_{Meanwhile, the new form of money he bequeathed the world goes from strength to strength. In the second week of 2024, the US Securities and Exchange Commission (SEC) approved the first US exchange-traded funds (ETFs) that track the price of bitcoin. Since then, over a dozen bitcoin US-domiciled ‘spot’ bitcoin ETFs have emerged, with BlackRock running the largest of the funds and Fidelity the second largest. In the first 12 months of their launch, bitcoin ETFs became the fastest growing ETFs in history having garnered $36 billion of net inflows}_[ii]._{In total, more than 80 ETFs, ETPs and funds have been launched on major exchanges and in most major financial and investment jurisdictions around the world to cater to growing investor demand for exposure to the asset.}

_{After 16 years of existence, bitcoin has gone institutional and mainstream.}

And wherever he is, he has about a million bitcoin, worth billions of dollars now, which he has never spent.

A ‘hard’ form of money

_{Bitcoin's fixed money supply}
_{makes it the most reliable way to store the value created from limited human time, arguably making it the best form of money ever invented. In other words, bitcoin offers the most efficient way to invest for the future, as no one can debase it, no matter how much its value rises.}

Saifedean Ammous

_{Since 1971, the US dollar has lost nearly 98% of its purchasing power against gold, yet it remains the world's dominant – though declining – reserve currency. This loss of purchasing power is primarily due to the continuous expansion of fiat currency supply. The more money that governments and central banks ‘print’, the more purchasing power their currencies lose. By contrast, the supply of bitcoin is strictly limited. As the economist Saifedean Ammous writes in his bestselling book,}_{The Bitcoin Standard}_{, no matter how many people use the network, how much its value rises, or how advanced the equipment used to produce it, there can only ever be a maximum of 21 million bitcoin}_[iii]_.

_{The emergence of a historically hard currency like bitcoin at this current juncture, when fiat currencies are increasingly losing their value, could have significant repercussions for future economic development in the UK. History teaches that if an easy form of money is in widespread use and a new, harder form of money emerges, those who use the hard money will get richer while those left using the easy money will get poorer. This process unfolds at both the individual and nation-state level and has occurred throughout history, often with far-reaching consequences for those who fail to transition in time.}

_{Growth of uk money supply (m4) 1913 – present
^{Sources: M4 Money Stock (Break Adjusted), St Louis Fed, June 9, 2017, Census 2021, Office of National Statistics}}

_{Fall in purchasing power of £100, 1913 – present}_{^{Source: CPI Inflation Calculator, 1913 → 2024, officialdata.org}}

_{What is Bitcoin halving and what does it do?}
_{^{Source: Bit2Me Academy}}

A 19th century example

_{A case in point was the transition of the global monetary system from silver to gold in the 19^th century. At that time, China and India, the world’s two most populous countries, continued to rely on the silver standard, which had been the basis of international trade for many centuries. In contrast, Britain became an early adopter of the gold standard, influenced by a series of strategic decisions.}

_{One pivotal moment occurred in 1717, when Isaac Newton, then Master of the Royal Mint, set a fixed exchange rate between gold and silver.}

_{While some have described this as an "overvaluation" of gold, it was a deliberate effort to stabilise the British currency. Gold’s higher stock-to-flow ratio – meaning its total above ground supply (or stock) grows (the flow) much more slowly than silver’s – makes it objectively a harder form of money.}

_{This decision gradually led Britain away from a bimetallic system and towards a de facto gold standard, which which undoubtedly played a role in Britain’s rise as an economic superpower.}

_{The global shift to gold gained momentum following the Franco-Prussian War of 1870–71. After defeating France, Prussia demanded reparations in gold, which accelerated Germany’s adoption of the gold standard in 1873.}

_{This move by Germany marked a turning point in global finance, encouraging other major economies to follow suit. Meanwhile, the value of silver plummeted due to reduced demand from nations transitioning to gold, devaluing the currencies of countries that stuck to the silver standard. India’s rupee, for instance, saw its value decline during this period, weakening the country's economic standing.}

_{China experienced similar problems, with currency devaluation contributing to long-term economic stagnation.}

_{The lesson is clear: nations that fail to adopt harder forms of money in a timely manner risk severe economic consequences. Today, bitcoin represents the new form of harder money in a world dominated like never before by easy money. The decisions governments, including the UK's, make in the coming years regarding bitcoin's role in their economies are likely to have a lasting impact on their future prosperity. Let us hope, for all of our sakes, that the British government and businesses make the right decisions in the months and years to come.}