Initially written for a now-defunct cryptocurrency media website.
2017 has been a crazy year for all the digital currencies.
Bitcoin peaked at $20,000 within the last 12 months, November became the month of ICOs, and more regulations and sanctions are being passed for cryptocurrency usage. We’re expecting more things to happen this year! Even now, governments are taking interest: The Government of Canada started using the Ethereum blockchain as a public ledger for their grant and contribution data.
There were talks of implementation by government throughout their nations for a while, but now we have proof! This is a huge difference from the year before, when blockchain technology wasn’t even considered for use in government institutions.
But, how did it become implemented to national level so quickly? How did Bitcoin rise to such a high price?
Let’s rewind the clock a bit.
How did the hype start?
For the tech-savvy, blockchain technology isn’t exactly new: since its inception in 2009 and the emergence of Bitcoin in 2011, we are reaching close to a decade since the start. Why had the Bitcoin hype rose so high in 2017 specifically? Let’s take a look at a few factors:
The Whales are coming!
As more and more people become involved in trading Bitcoin, the whales are the ones to affect and contribute to major price changes. These are the investors with large amounts of Bitcoin, most of them getting involved from the beginning. Every huge shift in price or large injection of capital meant more activity, and activity always breeds newsworthy updates. Through this, the whales can then breed the greatest level of activity – moving the prices up or down significantly, driving others to follow suit. If someone invests $1 million into Bitcoin back when it was $1 for example, that individual would have a lot of price-changing power in these times. Who knows what they’re going to do with it?
FOMO and its implications
Fear Of Missing Out (or FOMO) would tempt anyone who’s worried about not being included into this ‘money-making scheme’ to start reading up about it. ‘Scheme’ is put in quotes here, as during the time the terms ‘bitcoin’ and ‘blockchain’ were not really positively looked at in the eyes of the public. People look at the the price spike and think that it’s so artificially pumped up that there’s a bubble.There were so many supposed ‘bubbles’ that it became difficult to believe anyone. What better way to not get left behind than putting just a little bit into it for the time being?
Any form of social sentiment in this case, does affect the price in some way.
Fear, Uncertainty, Doubt. These are key factors that can affect the price of any altcoin. For individuals with high levels of influence, or individuals with a strong voice or network, it is simple to inject FUD into the minds of anyone who doesn’t know any better: stating your opinions that it might crash is one good example.
An argument on Twitter could suffice. Pairing a few financial terms in your supposed technical analysis of an altcoin can cause some form of panic amongst interested investors.
The catch, is that with many different elements of FUD being observed around the internet (whether it was on purpose or not), it creates media attention. Especially on social media, when people want to consume something all the time, having an emerging technology like this can always create news. It’s a goldmine for digital marketing agencies, content creators, or any individual who just wants to be loud. In the Information age particularly, anybody with an opinion can post it online for the world to see. Bitcoin/blockchain is no different – if you show your interest in Bitcoin, you’re riding the wave already. Your network can see that, and the seeds for FUD will start to take place.
People thrive on success stories. It’s like fiction: reading about someone’s success makes you feel better about yourself as you imagine being in their shoes. In the case of Bitcoin, there are so many rags-to-riches stories by people who only invested a little bit back in 2011.
It became the norm for social media to highlight the ones with the largest voice (and maybe the largest pockets): the key influencers in the blockchain space. For anyone remotely interested in Bitcoin, these are names that come up quite often. Some examples below:
- Vitalik Buterin: Inventor of Ethereum at the age of 19. Already one of the leaders in the blockchain industry, Buterin’s Ethereum enabled the usage of smart contracts and dApps, which meant chances for more kinds of applications to be explored over the next few years. He also takes the time to handle talks all around the world on Ethereum’s benefits and roadmap, and is very active online as an influencer. His efforts have Ethereum in the spotlight at all times, and for some that is more than enough reason to start investing into it.
- Roger Ver: Aptly nicknamed ‘Bitcoin Jesus’, Roger is an early investor in the Bitcoin movement and had helped brought up to speed many current brands you can see today. Brand names like Coinsetter, Kraken and Shapeshift helped a lot of investors to get into the trading scene, and his contributions allowed their enablement to do so. When he’s going to places all over the world to preach about the wonders of blockchain technology and its rewards (mostly monetary), it’s no wonder more and more people want to get in on it.
Regulation Changes across the World
Just recently, China escalated in doing a crackdown on Bitcoin trading within the country. Japan and the UK are accepting more and more cryptocurrencies into their financial ecosystem. Canada, as mentioned before, started using the technology as a ledger for public data. These are some examples of the different regulation changes that are happening around the world.
As larger entities are looking at blockchain technology developments and the like, the public would then take interest in their next move: What about Bitcoin? Will the government invest in Bitcoin? How about making our own?
Questions like these create hype, and hype is one of the factors that drive up the price. If the governments start taking notice of Bitcoin and its implications, then the public will naturally shift eyes towards it as well. The more impressions Bitcoin makes, the greater the chance of people participating in driving market price.
These are some examples of driving forces to up the hype. Now that it’s become the next investing scheme to look into, how will people react now? What do you think will be another rising factor in Bitcoin hype?