He paid 10,000 Bitcoin for two pizzas, or the equivalent of 35,000,000€ at today’s value!
by Marc Toledo (Managing Director bit4you.io)
Since I have been working in the cryptocurrencies’ world at bit4you.io, the people I meet have always asked me what makes a Bitcoin so valuable and which factors influence prices.
They have all heard through the traditional media about the heavy fall of Bitcoin at the end of December 2017 and the bad reputation that was often associated with it. A shocking title, a few images and then often, nothing more is needed to make up their mind. That is why I am writing this article to demystify a little bit this asset class.
It is true that in its early days in 2009, Bitcoin was only worth a few cents before reaching astronomical heights in 2017.
In the world of crypto lovers, May 22 is celebrated today in memory of a certain Laszlo Hanyecs, who in a discussion forum had published :
“I’ll pay 10,000 bitcoins for a few pizzas…. like maybe two big pizzas so I have some left for the next day. I like to have leftover pizza to munch on later. You can make the pizza yourself and bring it to my house or order it from a delivery place, but what I want is for the food to be delivered in exchange for bitcoins…
“If you’re interested, let me know and we’ll work something out.”
Laszlo had no idea that a few years later, these 10,000 BTCs could represent a few tens of millions of euros. Thus since then, every year, the “Bitcoin Pizza Day” is celebrated
The rise of Bitcoin
From that moment on, this computer code became a real intermediary in trade, which is one of the characteristics of currencies. And it is clear that this asset finally had a use in the real world and merchants began to accept them as payment. Demand has increased and logically, the value of the bitcoin has also increased.
Between the various opportunities emerging from the ICO’s, the growing popularity and the speculators taking part in this adventure, the value of active crypto has increased exceptionally in the last months of 2017. This was very quickly followed by a drop of nearly 80% over the year for some cryptos. Even though the value of its cryptos has increased in multiples of 10, 20, 50, 100,… over several years, we can see a lot of divergent opinions on whether or not it is a bubble. This reminds us of a history that has several characteristics in common with today’s situation.
Some of you will remember one of the first speculative bubbles in our history, the tulip bubble, which became a symbol of luxury in Holland at the beginning of the 17th century. People, already at that time, went so far as to sell their houses to buy bulbs thinking they could sell them with a high profit given the soaring prices of the latter. Demand goes up, prices rise, madness becomes collective and at a certain point, everything stops, someone starts selling and sales follow one another, prices decrease and the movement increases. Thus in 1637, banks, companies and thousands of families were ruined. We could also talk about the Japanese real estate bubble of 1990, the internet bubble of 2001, the sub-prime crisis that led to the bankruptcy of the Lehman-Brothers bank….
Bitcoin bubble or not?
Some people consider Bitcoin as a bubble, while others invest in the underlying technology with an eye to the future and consider it a simple correction. It is certain that blockchain and Bitcoin have experienced childhood diseases.
During the fall of the cryptos, speculators withdrew heavily and the Bitcoin price has now been around 4000 dollars for more than 4 months, which represents a total capitalisation of 70 billion dollars with nearly 250 billion dollars of exchange per month. So it’s not really insignificant.
We can notice that the popularity of Bitcoin is strongly linked to its value.
Today, 95% of large companies are interested in crypto!
According to an article published on 21/02/2019 in Forbes, the giant Swift, the Bank of China, the bank JP Morgan, ING, Berkshire Hathaway, IBM, Oracle… have confirmed they are investing in these technologies.
And as they say, there is no smoke without fire!
So, is it really a bubble? It’s up to you to make up your mind.
There are other elements that can help us understand the formation of its course, starting with its cost of manufacture.
As some of you already know, these are computers that allow its creation through the resolution of an incredible number of extremely complicated calculations that require very specific energy and equipment. The companies that produce it are real factories where there are thousands of computers lined up on shelves with crackling graphics cards that are able to perform calculations much faster than conventional processors. It is therefore also necessary to take into account an energy and material component in terms of underlying value.
In practice, the price of Bitcoin is established, as we have seen above, through the classic interplay of supply and demand.
As this price fluctuates over time, it is very difficult to anticipate its evolution because it is mainly based on subjective opinions, which are themselves influenced by global events reported by the media. We will list some of them for you
Elements negatively influencing prices:
- Security issue: hacking, theft
- Political decisions by certain countries and/or financial regulators prohibiting or restricting the use or sale of such assets
- Technical analyses based on statistical elements
- Price manipulation by certain major players called whales
- False rumours
- Taxation of earnings
Elements positively influencing prices:
- Announcement of major economic players who decide to accept crypto currencies as a means of payment
- Political decisions of certain countries and/or financial regulators accepting and regulating the use or sale of such assets
- Technical analyses based on statistical elements
- Implementation of techniques to eliminate fraud
- Growing demand from the population due to technological developments
As you will see, the answer to the question of the elements that make up the value of Bitcoin is complicated and must take into account many elements. Investing in crypto currencies today must be carefully considered, and we are convinced that the future is in crypto currency, whether in the form of bitcoin or another crypto-active.
By the way, Laszlo, according to our information, he does not regret paying for his two pizzas for 10,000 bitcoins.
bit4you is a European crypto assets exchange platform.
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Providing a complete set of blockchain related integrations, platforms and utilities is our vision.