2016 was a great year for cryptocurrencies and blockchain technology in general. However, Bitcoin has taken the spotlight making regular appearances in mainstream media and enjoying an ever-growing user base. An eventful year that saw us celebrate the second halving of the bitcoin block reward in July and the release of the SegWit update, whose activation is currently being voted on. Smart Contracts are also being developed for Bitcoin, with the RSK sidechain/drivechain testnet being released in November.
On the price charts, Bitcoin has had an amazing run, being considered as the best performing currency in 2016 by Bloomberg and breaking several records along the way. Starting the year in the $430 range, Bitcoin has grown around 120% and is currently sitting at $944.79. A rally that started to take effect shortly before the halving, in May and that saw a couple of hiccups along the way like the Bitfinex hack and the IRS' latest move to access CoinBase database to look for tax evaders. Nevertheless, Bitcoin grew and reached its all-time high market cap of 15.68 Billion dollars yesterday.
The 2016 rally, although similar to the one in 2013 in many ways, now enjoys a much higher trading volume, a wide diversification of traders and a much more advanced infrastructure. The rally is also supported by a growing user base around the world that are turning to Bitcoin as a safe-haven asset, especially in countries where economic and political uncertainty rule. Countries like India and Pakistan, where demonetization policies are taking effect have seen record-breaking demand for the cryptocurrency. Inflation has also made citizens turn to Bitcoin as a means to protect their savings and to escape tight capital flight restrictions. This is the case with Venezuela, where the growing devaluation of the currency has made users turn to bitcoin as a means to acquire basic goods and services that are often lacking within the country. Recently, Destinia airlines have decided to continue to operate in the country but is only accepting Bitcoin as payment.
China, a driving force in the Bitcoin price, has also seen a growing demand for the currency as the already weakened economy is threatened by the prospect of Trump's 45% taxation on U.S.A exports. Capital flight restrictions are being heavily enforced within the country that has now seen gold exportations being restricted. When not even gold is off limits, citizens have few choices but to turn to Bitcoin has a means to escape the devaluation of the currency.
All of these events have contributed to Bitcoin's amazing rally which has now many legs to stand on, something that cannot be said about the 2013-2014 bull run. Although it is unclear where this rally will take us, we may see a four-figure price before the year is over. Overall, 2016 has created the perfect storm for Bitcoin, which is now helping many achieve financial freedom and privacy.