Cryptocurrency has dominated financial conversations in 2017, with Bitcoin and Ethereum experiencing record-breaking growth. As of September 23, the market capitalization of all cryptocurrencies surpassed $131 billion, with Bitcoin leading at over $62 billion and Ethereum at $26 billion. The returns have been staggering—Bitcoin surged by 358%, while Ethereum skyrocketed by an astonishing 4000%.
To put this into perspective, Money magazine reported that a $10,000 investment in Bitcoin on September 1, 2016, would have been worth over $85,000 just a year later. This exponential growth has fueled a surge of new investors, but it has also drawn skepticism from financial giants like Warren Buffett, Ray Dalio, and Jamie Dimon, the latter even calling Bitcoin a “fraud.”
So, what’s behind this massive price surge? Is it merely speculative hype, or are there deeper forces at play?
1. The Ease of Access Driving Mass Adoption
One of the biggest factors contributing to cryptocurrency’s explosive growth is how easy it has become to purchase digital assets. Today, thousands of Bitcoin ATMs exist worldwide, allowing users to buy Bitcoin almost instantly. Online exchanges like Coinbase and Kraken have further simplified the process, making it accessible to everyday investors.
This ease of entry, combined with extensive media coverage, has led to a flood of new, less experienced buyers entering the market, further driving up demand.
2. Public Awareness and the Power of Network Effects
Cryptocurrency is no longer a niche subject—mainstream awareness has skyrocketed. From Netflix documentaries to Khan Academy courses, blockchain technology is being widely discussed, increasing public familiarity.
The rise of investment platforms like eToro’s “Crypto CopyFund” and Hargreaves Lansdown’s exchange-traded notes on Bitcoin have also contributed to the digital currency’s growing credibility. Additionally, celebrity endorsements from figures like Jamie Foxx and Floyd Mayweather have boosted interest in initial coin offerings (ICOs), further fueling market speculation.
What’s happening is a classic network effect—the more people adopt and talk about cryptocurrency, the more valuable it becomes. Investors hold Bitcoin because merchants accept it, and merchants accept it because investors hold it, creating a self-reinforcing cycle.
3. Cryptocurrency’s Appeal for Anonymity and Criminal Activity
Beyond mainstream adoption, another driving force behind Bitcoin’s price surge is its use in anonymous transactions, often linked to illegal activities. Bitcoin remains a preferred medium for cybercriminals, with its untraceable nature making it the “currency of choice” for hackers, money launderers, and dark web transactions.
A University of Florida study even suggested that cryptocurrencies could become the ultimate “super tax havens,” allowing for large-scale tax evasion. Regulatory crackdowns are increasing, with the SEC suspending trading in certain blockchain-related companies and the Commodity Futures Trading Commission (CFTC) investigating fraudulent ICOs.
While the extent to which criminal activities contribute to Bitcoin’s price rise is debatable, its role as an anonymous currency undeniably fuels its demand.
4. The ICO Boom and Its Role in Driving Bitcoin and Ethereum Prices
The initial coin offering (ICO) market has played a crucial role in Bitcoin and Ethereum’s price explosion. Startups are raising billions by issuing digital tokens, which often require Bitcoin or Ethereum for purchase.
With over $1.2 billion raised in ICOs in 2017 alone, the demand for these leading cryptocurrencies has surged. As more companies enter the ICO space, Bitcoin and Ethereum benefit from increased buying pressure, further pushing their prices upward.
5. A Deepening Distrust in Traditional Banking
The 2008 financial crisis left lasting scars on global finance, and many individuals remain skeptical of traditional banking systems. Cryptocurrencies, with their decentralized nature, offer an alternative financial system free from institutional control.
Venture capitalist Rick Yang has noted that fintech’s rise stems from a “massive distrust of existing financial services.”Bitcoin’s growing popularity reflects this sentiment, positioning it as a digital financial alternative resistant to manipulation by governments and banks.
As The Guardian put it, Bitcoin represents a “rival value system” to traditional banking—one that operates beyond the reach of central authorities.
6. Bitcoin as a Global Safe Haven Amid Geopolitical Uncertainty
In countries experiencing economic instability, Bitcoin has emerged as a potential hedge against currency devaluation. Venezuela, for example, has seen a rise in cryptocurrency mining as a way for citizens to escape hyperinflation.
Some analysts now compare Bitcoin to “digital gold”—a fixed-supply asset used as a hedge in times of crisis. Financial experts like Naeem Aslam suggest that investors are increasingly viewing cryptocurrency as a “safe-haven asset”, similar to gold or the U.S. dollar.
The Road Ahead: A Bubble or the Future of Finance?
As cryptocurrency continues its meteoric rise, the debate rages on: Is this a financial bubble, or are we witnessing the birth of a revolutionary financial system?
Yale economist Robert Shiller likens Bitcoin’s rise to past speculative bubbles, arguing that “stories, not fundamentals”are driving the price surge. Yet, even if Bitcoin experiences a dramatic crash, its underlying blockchain technology is likely here to stay—much like the internet boom of the late 1990s, which ultimately gave rise to today’s digital economy.
Former SEC Chairman Arthur Levitt Jr. believes that cryptocurrency is “here to stay”, and given the global instability and growing distrust in traditional financial systems, digital assets may remain a crucial part of the financial landscape for years to come.
The question is no longer if cryptocurrencies will survive, but in what form they will shape the future of global finance.