“We have proposed a system for electronic transactions without relying on trust.” — Satoshi Nakamoto
On Oct. 31, 2008, an obscure white paper was published online describing “a peer-to-peer electronic cash system.” That white paper would eventually serve as the blueprint for decentralized finance, spawning a monetary revolution that continues to this very day.
The original king of cryptocurrencies, Bitcoin was created nearly 15 years ago by a person or entity known as Satoshi Nakamoto. Born out of the 2008 financial crisis but with a development track record that long predates it, Bitcoin proposed a system for electronic transactions without relying on trust or third-party involvement. Nakamoto’s white paper eloquently described the workings of a digital currency system whose coins are created, distributed and stored on a decentralized ledger. Unlike fiat currency, whose supply can be manipulated by governments and monetary authorities, Bitcoin’s inflation rate and total supply are hard-coded into the system.
Bitcoin has had a highly volatile track record since Nakamoto mined its genesis block in 2009. It has been declared dead nearly 500 times by mainstream media, but it continues to operate the way Nakamoto intended, producing block after block of transactions. As the industry surrounding Bitcoin continues to experience growing pains — and face regulatory attacks — the original cryptocurrency has differentiated itself from the pack thanks to its robustness, security and predictability.
There’s no way to sugarcoat it: 2022 was a brutal year for Bitcoin’s price. The flagship cryptocurrency plunged nearly 65% and was down over 75% from its November 2021 peak of around $69,000. Of course, Bitcoin’s price collapse didn’t occur in a vacuum but against a backdrop of geopolitical uncertainty, declining economic growth and nearly unprecedented monetary tightening from central banks. Beyond Bitcoin, 2022 was the worst year for global equities and bonds since the 2008 financial crisis. In the case of the U.S. bond market, 2022 was one of the worst years ever recorded.
Bitcoin’s poor performance during the year served as a stern reminder that the flagship cryptocurrency remains highly correlated with stocks and is still perceived as a risk-on asset by mainstream investors. But its decline was also associated with a bloody deleveraging in the cryptocurrency industry that spawned crisis after crisis. The depegging of Terra’s UST and its eventual death spiral; the bankruptcies of Celsius, BlockFi, Genesis and Three Arrows Capital; and the collapse of Sam Bankman-Fried’s FTX empire all highlighted the collective failures of the crypto industry in 2022. Those failed ventures were built on the idea of decentralizing finance brought about by Bitcoin but ultimately went off on a more centralized route. They collapsed, but the underlying characteristics of Good Ol’ Bitcoin remained unchanged. Bitcoin is still here — bruised but definitely alive.
No matter how much Bitcoin FUD there is in the media, the very first cryptocurrency is still on track to do spectacular things. Even as regulators tighten the noose around crypto products and services, they’ve already deemed Bitcoin to be sufficiently decentralized and outside the purview of securities laws. Whether it achieves its lofty adoption targets in 2023 is yet to be seen, but what is known for sure is that the principles of decentralization that Bitcoin stands for are still here and probably more evident than ever.
If Bitcoin’s previous cycles are an indication of what’s to come, 2023 is likely to be a positive year for the asset from a price perspective. The next 12 months will pave the way for Bitcoin’s quadrennial halving — scheduled for sometime in Q2 2024 — which is usually a tailwind for the asset.
The world is once again facing the risks of economic recession. The 2007–2008 financial crisis gave birth to Bitcoin, but what about now? It’s possible we may see some positive adoption stories this year as citizens of hyperinflated emerging markets opt for digital gold and portfolio managers in advanced economies diversify into BTC. Stacking sats may once again be in fashion in 2023.
