Mastering Blockchain

Chapter 6. Market Infrastructure

Bitcoin, ether, and many other cryptocurrencies are openly traded on various markets around the world. Speculation is estimated to account for 60–80% of all blockchain transactions, which makes examining this component of blockchain important.

In the early days, a lack of infrastructure made the blockchain ecosystem highly volatile and risky. Although things have improved, the cryptocurrency market infrastructure is still far from perfect. A lot of structural scaffolding has been built, but there are still critical issues with the way these markets function. They’re not fully regulated, and manipulation exists. This chapter is in no way an endorsement of speculation in cryptocurrency. To put it plainly, it’s possible to lose a lot of money trading cryptocurrency.

Evolution of the Price of Bitcoin

Bitcoin is the bellwether of the entire cryptocurrency economy. This means the prices of other cryptocurrencies generally follow the trend of BTC—and it’s important to understand that peaks and valleys in price are the norm for this, the world’s most popular digital asset (Figure 6-1).

There have been many bitcoin bubbles, each one resulting in a higher price than the last, as more and more players entered the ecosystem for various reasons. Here are some of the bubbles that have led to all-time highs for BTC:

• 2010 (1): Price goes from $0.008 in October to $0.08 in November, 900% increase

• 2010 (2): Price rises to $0.50 by end of November, 525% increase ...