Like other instruments used to store value in times of uncertainty, bitcoin has benefited from the pandemic that has pushed other commodities like gold, silver, platinum to multiyear highs. Because of bitcoin’s structure, few coins are being created anymore and there is relative scarcity.
Here’s a brief look at bitcoin:
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HOW BITCOINS WORK
Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who “mine” them by lending computing power to verify other users’ transactions. They receive bitcoins in exchange. The coins also can be bought and sold on exchanges with U.S. dollars and other currencies. Some businesses also accept bitcoin, but its popularity has stalled out in recent years.
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WHAT HAPPENED?
Bitcoins got their big Wall Street debut in December 2017, when bitcoin futures became tradable on the Chicago Mercantile Exchange and the Chicago Board of Trade. The fervor and interest in bitcoin heading into its trading debut pushed the digital currency to record highs. The currency, which was worth less than $1,000 at the beginning of 2017, climbed up to $19,783 by the end of the year.
But once the trading began, bitcoin futures fell sharply over the course of several months. A year later, the currency was worth less than $4,000. Investors and bitcoin enthusiasts at the time said the 2017 jump was largely caused by speculative interest and media attention.