2015 was another milestone year for cryptocurrency, with groundbreaking developments in its underlying technology and regulation, and an unexpected turnaround in bitcoin prices.
Blockchain Technology Emerges
Whereas blockchain technology for non-bitcoin applications was confined to the conceptual realm of ‘Bitcoin 2.0’ in 2014, 2015 was the year financial firms “officially” discovered it (in some cases, ambitions date back further, but were only disclosed this year). Both Bitcoin’s blockchain and other distributed ledger systems inspired by it are envisioned to revolutionize the settlement of securities and Payments , as well as for non-financial applications like land title records.
At the beginning of Q2, only a handful of firms had disclosed their interest. By year’s end, dozens of financial institutions were involved, with many joining consortiums developing the technology in collaboration. Most of the world’s largest banks are now involved; it is now standard for a large bank to be exploring the technology.
Also joining the blockchain race were major stock and futures exchanges, clearing houses, technology giants and other organizations. Under strong consideration is Ethereum, a 'Bitcoin 2.0' (or 'Bitcoin 3.0') technology that was launched during the year.
A Peak for Venture Investment?
2015 saw around $500 million poured into crypto industry startups, half of the roughly $1 billion total invested to date. While this was the highest annual total thus far, investment activity slowed considerably as the year progressed. Early in the year, two startups set new records for the amount invested in a single round.
2015 may have been a peak for venture investment, particularly in bitcoin-as-a-currency. By year’s end, most venture investment had shifted to blockchain technology.
Bitcoin Matures, But With Growing Pains
A number of instruments tracking bitcoin’s value went public, as did companies engaged in Bitcoin or blockchain technology. The industry’s first IPOs encountered delays.
New York State’s BitLicense regulations were revised and enacted. Elsewhere, Bitcoin regulation remained a lower priority. Two bitcoin exchanges who obtained trust charters, allowing them to operate as licensed financial institutions, are exempt from these regulations. These offerings are catering to what may be greater mainstream interest in bitcoin investment.
The US Securities and Exchange Commission (SEC) and US Commodities Futures Trading Commission (CFTC) were repeatedly involved in cryptocurrency-related matters.
Overall, there were refinements to Bitcoin technology and offerings, and fewer major security incidents like hacking-related theft.
While the number of transactions performed over the network continues to increase, the vision of bitcoin becoming a currency adopted by the masses appears nowhere near materializing.
Fierce debate over how to scale Bitcoin caused the community to split and may lead to a fork in its blockchain. Bitcoin’s limitations became apparent through numerous attacks on the network.
Bitcoin Prices Roar Back to Life
Despite Bitcoin’s growing pains and blockchain technology stealing the spotlight, traders apparently fell in love with bitcoin as an asset again.
To start the year, bitcoin plunged to near $150, leading some to again predict its ultimate downfall. For nearly 10 months, it failed to trade in positive territory even once. But it held its ground above $200, and 2015 turned out to be bitcoin’s most stable year. The advent of regulated exchanges and trading instruments may have been a factor.
In Q4, bitcoin spiked as high as $500. Much of the price activity was driven by China. Some reports claimed that prices were artificially inflated by demand to join a Ponzi scheme. Volatility returned, but as of the time of this writing, bitcoin had gained 42% to $456 in 2015.
The price action was accompanied by reported trading volumes that repeatedly smashed old records, though most of the reported figures cannot be independently verified.
Interest and trading volumes in altcoins and most ‘Bitcoin 2.0’ currencies dissipated, with the exceptions of Litecoin, Ripple and Ethereum.
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