From its shadowy beginnings as a virtual currency powering crime on the internet,

to an asset some are calling a serious competitor to gold, bitcoin's journey has been quite the roller coaster.  

In 2021, major companies such as Tesla and  Mastercard started to embrace cryptocurrencies,

pushing them further on the path towards mainstream adoption.

But with regulators taking a closer look at crypto, and volatility continuing to plague the market, it's not a sure bet.

So, what's next for bitcoin?

Bitcoin was first conceived during the global financial crisis of 2008. It was proposed by Satoshi Nakamoto,

an anonymous individual, or group of individuals, in a  white paper. In the world of crypto, white papers

have become synonymous with elevator pitches, where developers try to convince people to care about their new coin.

Ryan Token, anyone?

In bitcoin's white paper, Nakamoto envisaged the cryptocurrency as a “peer-to-peer version of electronic cash.”

Value would be exchanged from one person to another without the involvement of middlemen like banks.

And instead of depositing or withdrawing your money at the bank like you would with physical cash,

with bitcoin you could effectively be your own  bank by storing it in a digital wallet.  

This is Tom Robinson. He's the co-founder and chief scientist at Elliptic, a blockchain security firm.

He's been active in the cryptocurrency  space for over a decade.

When I first got involved in Bitcoin back in 2011, the only people really discussing it

were people in meetup groups that would sort of meet up in the back rooms of pubs in London.

And that was really exciting.

It felt like a very nascent, exciting space where people didn't really understand the potential, but they could see

something in the technology that they believed was going to be  a big deal, that was going to be disruptive.  

Bitcoin and other cryptocurrencies are  underpinned by what's known as the blockchain.

You can think of it as a modern-day ledger in digital form.  But rather than being updated by a bank clerk,

a blockchain is maintained by a distributed  network of computers around the world.

Unlike traditional currencies like the British pound,   bitcoin and other cryptocurrencies don't have the backing of governments.

Rather, they're worth whatever investors are willing to pay for them which, nowadays, is a lot.

In the past couple of years, bitcoin has climbed from one record  high to the next. At the start of 2020,

it was trading at a price of over $9,000.  But as time went on, bitcoin soared in value.

By mid-November 2021, the cryptocurrency  reached an all-time high above $68,000.

“What do you think has kind of been driving the  performance of bitcoin over the course of 2021?”

“Other than Elon Musk?”  

Mark Hipperson, CEO and co-founder at the  cryptocurrency trading platform Ziglu,

is referring to the growing number of high-profile figures  coming out in support of the cryptocurrency.

“There's lots of celebrities supporting it now, and to be honest it genuinely has helped in

terms of people's awareness of cryptocurrency.”

Big names are getting behind bitcoin in the hopes  of protecting themselves against rising inflation.

Governments have deployed unprecedented stimulus  to tackle the coronavirus crisis, and there are

fears the trend is weakening the purchasing power  of sovereign currencies like the US dollar.

“Quantitative easing, trillions of pounds going into the world economy   because of Covid and trying to make sure

that we don't go into a recession -  which we haven't done of course, not really

- has meant that people are looking for safe places to put their money.”

But where does bitcoin derive its value from?

“Well supply and demand, and what someone is prepared to pay for it. It is simple as that in many terms.

More people are wanting to get involved in it and people are seeing the negative effects of, I guess monetary and fiscal policy.

Key to the bitcoin bull case is the idea that there's a scarce supply of the number of bitcoins in circulation.

A rule written in the original bitcoin code means that only 21 million units of currency will be minted in total.

That's led some investors to call it “digital gold.” They believe bitcoin promises similar qualities as an

asset to physical gold, which has a limited  supply and is often viewed as a “safe haven”  

away from global economic uncertainty.

Bitcoin's rise has in turn fueled interest in dozens of other cryptocurrencies, 

some of which have surged through the ranks of the world's top coins.  

These include ethereum, ripple, cardano, solana and dogecoin.

Experts say that what makes the latest bitcoin  boom different from previous crypto market rallies

is the involvement from large institutional investors with deep pockets.

Crypto-native trading firms such as Alameda Research and B2C2   now trade billions of dollars' worth

of transactions in a single day. And established  Wall Street firms like Jump Trading and Jane Street

are also jumping into the market. In late 2017 and early 2018, bitcoin and  

other digital currencies soared to  huge levels before plunging sharply.

According to experts, that's because the market then was largely fueled by amateurs and speculators.  

Today, crypto investors believe the market has matured, with large  institutional funds and even corporations

like Tesla buying up bitcoin. Elon Musk's  electric car maker purchased $1.5 billion  

worth of the cryptocurrency in February 2021. And, following the stock market debut of crypto  

exchange Coinbase two months later, many investors are betting it will become easier to get exposure to bitcoin and  

other digital assets through more traditional investment vehicles.

Carol Alexander, Professor of Finance at Sussex University, explains more.

It's become the mainstream cryptocurrency.  It's used for transactions, it's not really  

used for anything else like some of the other crypto assets.

And it's attracted a lot of mainstream interest from   U.S. institutions and so forth, particularly since Coinbase

launched last year, allowing ordinary  retail investors, of course, to trade it.  

And also, there are these exchange-traded funds,

these ETFs that the SEC is in the process of gradually agreeing to roll out to large institutions.

An exchange-traded fund is a basket of financial securities that tracks certain assets, like an index or a sector.

They can be traded on stock exchanges, just like a share in a company. In 2021, the Securities and Exchange  

Commission gave the green light to the first U.S. bitcoin-linked ETF.

And bitcoin bulls hope there will be more ETFs  tracking the cryptocurrency in the future.

There's even a country where bitcoin is considered  legal tender, with El Salvador enacting a law

requiring businesses to accept  bitcoin as payment in September 2021.

Experts say such moves will pave the way for  further acceptance of cryptocurrencies.

The first ever real-world bitcoin transaction was   believed to have happened in 2010 when a Florida-based man

exchanged some for two pizzas. But despite all  the traction bitcoin has gained, there are  

still some big hurdles it needs to overcome. For one, bitcoin remains incredibly volatile.  

It's been known to increase or decrease over 10% in a single day. And critics argue these enormous price fluctuations have made bitcoin less  

effective as a means of payment. Another big use of bitcoin in its infancy was crime. Tom told me more.

“Most people associated bitcoin with the Silk Road, which was a darknet marketplace where you could buy drugs or hacking tools or  

you know, fake IDs. And so we looked for a solution to  that problem. And what we realized was that,

you know, Bitcoin is actually highly traceable. And that you can identify transactions associated with criminal activity.”

Over the years, bitcoin's reputation has morphed  from a protest against the financial establishment

to an investment that's increasingly  being embraced by Wall Street.

And the portion of crypto that's being used for  illegal activity appears to be on the decline,

with data showing only 0.15% of bitcoin  transactions in 2021 were related to crime.

Still, with bitcoin prices at historic highs, it's become a much more lucrative asset for criminals to exploit.

In May 2021, hackers attacked a U.S. oil pipeline system

in a ransomware attack that took the critical energy infrastructure offline.

So last year, a new ransomware group called DarkSide emerged. And they perpetrated one particularly

high-profile attack against a company called Colonial Pipeline,

which is responsible for much of the fuel transport infrastructure on the East Coast of the United States.

And so, this attack basically crippled that company, and meant that people couldn't refuel their cars.

Colonial paid DarkSide, the hacking group  behind the attack, nearly $5 million in  

bitcoin to restore access to its systems. But they weren't completely successful. 

A month later, U.S. authorities seized $2.3 million of the haul, after locating one of DarkSide's virtual currency wallets.

What we were able to do is identify in the blockchain

a transaction that was highly likely to have been made by Colonial Pipeline to the Dark Side ransomware operators.  

And that was based on network analysis, and also some leaked information about a payment that had been made by Colonial.  

Based on that, we were able to identify the central Bitcoin wallets being used by that ransomware gang,  

and therefore we could identify all the other ransom payments that they received over the past year or so.

Nevertheless, even the possibility that  cryptocurrencies can be exploited by criminals  

is causing concern for regulators. Top officials such as the U.S. Treasury Secretary and the European Central Bank chief have

raised the alarm on criminals exploiting bitcoin and other digital tokens.

And while El Salvador has emerged as a  pro-bitcoin player on the global stage,

China - the world's second-largest economy - isn't as sympathetic to the cause.

Beijing officially banned all crypto-related activity in September 2021.

If I were invested in bitcoin now, I would probably sell fairly soon. I think there's going to be a major crash,

major, major crash down to 10 or even more.

Carol fears bitcoin is being exposed to price manipulation at the hands of a few large investors using tether,

a controversial digital currency that tracks the US dollar.   She says regulators are growing concerned by this trend as well.  

“The reason I think that I'm very bearish  on bitcoin at the moment is the way that

it's been traded in conjunction with tether, with very little intrinsic value, just for speculation.”   

Some of these concerns have already started to weigh on bitcoin's price, with the cryptocurrency now well below its all-time highs.

Meanwhile, there are also concerns about  bitcoin's impact on the environment.

Mining the cryptocurrency is an energy intensive process   that requires powerful purpose-built machines.  

In a single year, the bitcoin network can use  as much as 120 terawatt-hours of electricity.

For context, that's on par with entire  countries such as Norway and Ukraine.  

It's also close to the gold industry's energy needs.

So what's next for bitcoin? Well, if one thing is clear,  

it doesn't look like the world's biggest digital  currency is going anywhere anytime soon.

I think it's become clear that there is broad  mainstream demand for crypto and crypto services.

And so we're seeing financial institutions start to   offer crypto offerings along their more traditional products.

And so I think that, you know, within the next few years,  

it wouldn't be unusual to see a Bitcoin  balance alongside your regular bank balance.

So, just how much will that bitcoin be worth?  Well, that's debatable. Some investors worry the

bull case for bitcoin will break down, as  central banks roll back the stimulus measures

they put in place to boost the  economy during the Covid-19 pandemic.

But the path ahead is sure to be a bumpy one. Fitting, perhaps, for something as young and fast-moving as bitcoin.