An individual or group of people going by the name of Satoshi Nakamoto created the specifications for bitcoin in 2008. A year later, the currency became available to buy after being released as open-source software.
Bitcoin’s price history has been tumultuous, to say the least. As one of the first crypto assets, most investors did not (and still don’t) know how to value it correctly.
If it replaces cash entirely, then its value could continue to grow. If it doesn’t or is stamped out by governments, then it may not have any value at all.
For the first few months of its existence, bitcoin’s price was relatively flat. However, from 2010 onwards, the value of a bitcoin went from $0.0008 to $0.08 - a one-hundred-fold increase in value. Early investors in the cryptocurrency who sold at the right time saw a tremendous appreciation in the value of their holdings.
Bitcoin’s price, however, soon crashed. Many investors compared it to the Dutch Tulip Mania of the later 17th century or the fad for Japanese Tamagotchis at the end of the 1990s. Their comments spooked retail and institutional buyers who didn’t understand its intrinsic value as currency.
A year or so later, the price of bitcoin jumped back. Retail investors began learning about it more online and how government currencies work. They discovered that many central banks simply print fiat money into existence, transferring purchasing power to the people who hold the new cash first.
Not liking this state of affairs, many retail investors saw the bitcoin market as a way to escape the fiat money trap (something driven by the fear of financial collapse after the Financial Crisis). What ensued was a buying frenzy that helped to increase the price of a bitcoin from $1 in April of 2011 to more than $32 by June, just three months later.
This price growth soon caught the eye of institutional investors - large hedge funds and banks with billions of dollars at their disposal. They too started to invest. However, a panic swept the market from around September, and the price of bitcoin fell to a low of $2 by the end of 2011.
Throughout the following years, a similar pattern played out. Periodically, bitcoin would burst out of its regular price band and shoot for new heights. This mania would then be followed by a crash where bitcoin would undershoot its baseline valuation. Interestingly, though, the price always recovered to a slightly higher level for the next round.
The fifth such bubble occurred in 2017. At the start of the year, the currency’s price was hovering around $1,000. But then, by December, it reached an astonishing $20,000 before crashing back down to Earth. As of 2021, the price of a single bitcoin was trading in the $30,000 to $60,000 range.
The history of bitcoin is, therefore, wild. And yet, with each mania, the price recovers higher than baseline, encouraging yet more investors to pile in. At the same time, its network expands, increasing its value.
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