WEBVTT 00:00:00.000 --> 00:00:05.360 A while ago, we did a video covering the major Bitcoin decline that happened in late 2018, 00:00:05.360 --> 00:00:10.400 and what led up to it. But while many pointed to the Bitcoin crash as proof that crypto was just 00:00:10.400 --> 00:00:17.520 a fad or a giant bubble, it's come back in a big way, with Bitcoin recently topping 50,000 US dollars. 00:00:17.520 --> 00:00:23.600 It's gone up in value 15-fold since the crash. But why has Bitcoin swung back the other way so 00:00:23.600 --> 00:00:29.040 sharply? Part of the answer has to do less with the technology and more with a classic problem 00:00:29.120 --> 00:00:34.720 in economics, inflation. You see, as more and more money is added to circulation, 00:00:34.720 --> 00:00:40.320 the relative value of a dollar goes down over time. And while most economists agree that a low 00:00:40.320 --> 00:00:45.280 but non-zero rate of inflation is a good thing for reasons that are outside the scope of this video, 00:00:45.280 --> 00:00:51.440 the rate of inflation of the US dollar has been higher since around 2010, and hit a large spike 00:00:51.440 --> 00:00:56.480 recently with the government-issued stimulus checks, which pumped tons more money into the 00:00:56.480 --> 00:01:02.160 US economy. All this inflation devalues the dollar, making Bitcoin attractive as an investment 00:01:02.160 --> 00:01:06.960 because it's resistant to inflation, leading some folks to believe it'll end up holding its value 00:01:06.960 --> 00:01:12.720 better. But why is that? Well, it turns out it's actually written into Bitcoin's code that only 00:01:12.720 --> 00:01:18.480 so much of it will ever exist. Unlike a country's central bank, which can just keep printed money 00:01:18.480 --> 00:01:24.160 whenever its government wants, Bitcoin has a hard circulation limit of 21 million Bitcoins, 00:01:24.160 --> 00:01:29.280 and over 18 million of those have already been mined. Because the difficulty of mining increases 00:01:29.280 --> 00:01:35.440 over time, it'll actually take until the year 2140 to mine the remaining 2 million plus Bitcoins. 00:01:35.440 --> 00:01:40.080 And although this has been true of Bitcoin since the beginning, these stimulus programs developed 00:01:40.080 --> 00:01:44.960 in response to the pandemic have caught the attention of people other than individual investors 00:01:44.960 --> 00:01:49.920 or folks mining Bitcoin on their home gaming rigs. Large institutions like banks and well-known 00:01:49.920 --> 00:01:54.400 corporations started recognizing Bitcoin's potential as a real store of value this year. 00:01:54.400 --> 00:01:59.760 BNY Mellon, one of America's largest banks, announced it would start holding Bitcoin for 00:01:59.760 --> 00:02:04.400 customers, and Apple Pay and Mastercard have started supporting Bitcoin payments as well. 00:02:04.400 --> 00:02:09.360 But one big criticism of Bitcoin has been the fact that folks who dabble in it aren't really doing 00:02:09.360 --> 00:02:14.800 more than mining it and trading it for actual currency. They're not using it to buy TVs or 00:02:14.800 --> 00:02:19.840 burritos or whatever. But the idea that Bitcoin could become a more mainstream way of paying for 00:02:19.920 --> 00:02:26.160 actual stuff is gaining more traction. As Elon Musk's Tesla, notably, bought a billion and a 00:02:26.160 --> 00:02:31.120 half dollars worth of Bitcoin and announced customers, could use theirs to pay for their cars. 00:02:31.120 --> 00:02:35.440 And it helps to remember that Bitcoin is still a relatively new player on the financial scene. 00:02:35.440 --> 00:02:41.040 I mean, it was only invented in 2008, and it was only 11 years ago that a programmer spent 00:02:41.040 --> 00:02:46.960 10,000 Bitcoins on a couple of pizzas. This means that the infrastructure that underpins 00:02:47.040 --> 00:02:52.400 Bitcoin has needed time to mature, and it has to a large extent, with respected exchanges 00:02:52.400 --> 00:02:57.280 making it easier than ever to buy and sell crypto. Of course, that doesn't mean that these exchanges 00:02:57.280 --> 00:03:01.520 aren't still vulnerable to manipulation by folks carrying out pump-and-dump schemes, 00:03:01.520 --> 00:03:06.080 which we explained in our previous video on the 2018 Bitcoin crash. However, as Bitcoin 00:03:06.080 --> 00:03:10.400 rises in popularity and value, government regulators are taking a much harder look at 00:03:10.400 --> 00:03:15.760 cracking down on market manipulation, which may help prevent drastic drops in value in the future. 00:03:15.760 --> 00:03:21.280 Don't get us wrong, though. Bitcoin isn't well-regulated yet, and it still is very much a 00:03:21.280 --> 00:03:25.280 speculative investment, so we're not telling you to dump your life savings into it. But it seems 00:03:25.280 --> 00:03:29.360 that more and more people have been willing to take a chance on it, as interest rates are currently 00:03:29.360 --> 00:03:33.280 being kev low to encourage borrowing and spending during the recession caused by the pandemic. 00:03:33.280 --> 00:03:37.440 These low rates also mean that many people aren't getting as high of a return on their 00:03:37.440 --> 00:03:42.000 investments as they're used to, further fueling interest in Bitcoin. If you choose to buy some, 00:03:42.000 --> 00:03:46.800 keep your fingers crossed that Bitcoin will last longer than the beanie baby bubble.