Bitcoin’s Price History

Among asset classes, Bitcoin has had one of the more volatile trading histories. The cryptocurrency’s very first big price increase occurred in 2010 when the value of a single Bitcoin jumped from just a fraction of a penny to $0.08. It has undergone several rallies and crashes since then. Some have compared the cryptocurrency (and its price movements) to the fad for Beanie Babies during the 1990s while others have drawn parallels between Bitcoin and the Dutch Tulipmania of the 17th century. 

The price changes for Bitcoin alternately reflect investor enthusiasm and dissatisfaction with its promise. Satoshi Nakamoto, Bitcoin’s inventor, designed it for use as a medium for daily transactions and a way to circumvent the traditional banking infrastructure after the 2008 financial collapse. Though the cryptocurrency has yet to gain mainstream traction as a currency, it has begun to pick up steam through a different narrative—as a store of value and a hedge against inflation.

Though this new narrative may prove to hold more merit, the price fluctuations of the past primarily stemmed from retail investors and traders betting on an ever-increasing price without much grounding in reason or facts. But Bitcoin’s price story has changed in recent times. Institutional investors are trickling in after the maturing of cryptocurrency markets, and regulatory agencies are crafting rules specifically for them. Though Bitcoin price still remains volatile, it is now a function of an array of factors within the mainstream economy, as opposed to being influenced by speculators looking for quick profits through momentum trades.

Bitcoin Price History

For the most part, Bitcoin investors have had a bumpy ride in the past roughly 13 years. Apart from daily volatility, in which double-digit inclines and declines of its price are not uncommon, they have had to contend with numerous problems plaguing its ecosystem, from multiple scams and fraudsters to an absence of regulation that further feeds into its volatility. In spite of all this, there are periods when the cryptocurrency’s price changes have outpaced even their usually volatile swings, resulting in massive price bubbles.

• The first such instance occurred in 2011. Bitcoin’s price jumped from $1 in April of that year to a peak of $32 in June, a gain of 3,200% within three short months. That steep ascent was followed by a sharp recession in crypto markets, and Bitcoin’s price bottomed out at $2 in November 2011. There was a marginal improvement the following year, and the price had risen from $4.80 in May to $13.20 by Aug. 15.        
• 2013 proved to be a decisive year for Bitcoin’s price. The digital currency began the year trading at $13.40 and underwent two price bubbles in the same year. The first of these occurred when the price shot up to $220 by the beginning of April 2013. That swift increase was followed by an equally rapid deceleration in its price, and the cryptocurrency was changing hands at $70 in mid-April.
• But that was not the end of it. Another rally (and associated crash) occurred toward the end of that year. In early October, the cryptocurrency was trading at $123.20. By December, it had spiked to $1,156.10. But it fell to around $760 three days later. Those rapid changes signaled the start of a multiyear slump in Bitcoin’s price, and it touched a low of $315 at the beginning of 2015.

• The fifth price bubble occurred in 2017. The cryptocurrency was hovering around the $1,000 price range at the beginning of that year. After a period of brief decline in the first two months, the price charted a remarkable ascent from $975.70 on March 25 to $20,089 on Dec. 17. The 2017 hot streak also helped place Bitcoin firmly in the mainstream spotlight. Governments and economists took notice and began developing digital currencies to compete with Bitcoin. Analysts debated its value as an asset even as a slew of so-called experts and investors made extreme price forecasts.
• As in the past, Bitcoin’s price moved sideways for the next two years. In between, there were signs of life. For example, there was a resurgence in price and trading volume in June 2019, and the price surpassed $10,000, rekindling hopes of another rally. But it fell to $7,112.73 by December of the same year.
• It was not until 2020, when the economy shut down due to the pandemic, that Bitcoin’s price burst into activity once again. The cryptocurrency started the year at $7,200. The pandemic shutdown and subsequent government policy fed into investors’ fears about the global economy and accelerated Bitcoin’s rise. At close on Nov. 23, Bitcoin was trading for $18,353. The pandemic crushed much of the stock market in March, but the subsequent stimulus checks of up to $1,200 may have had a direct effect on the markets. Upon the release of those checks, the entire stock market, including cryptocurrency, saw a huge rebound from March lows and even continued past their previous all-time highs. These checks further amplified concerns over inflation and a potentially weakened purchasing power of the U.S. dollar. Money printing by governments and central banks helped to bolster the narrative of Bitcoin as a store of value as its supply is capped at 21 million. This narrative began to draw interest among institutions instead of just retail investors, who were largely responsible for the run-up in price in 2017. The bull run was on.
• By March of 2021, bitcoin prices reached new all-time highs of over $60,000. Continued institutional interest in the cryptocurrency further propelled its price upward, and Bitcoin’s price reached just under $24,000 in December 2020, for an increase of 224% from the start of that year. It took less than a month for Bitcoin to smash its previous price record and surpass $40,000 in January 2021. Bitcoin eventually reached a peak of more than $64,000 on April 14, 2021. The summer, however, saw prices fall by 50%, hitting $32,000. The Autumn of 2021 saw another bull run, with prices scraping $50,000, but accompanies by large drawdowns to around $42,500.

Analyzing Bitcoin’s Price History 

Bitcoin’s novelty as an asset class means that its story is still being crafted. Its price has mostly mimicked the classic Gartner Hype Cycle of peaks due to hype about its potential and troughs of disillusionment that resulted in crashes. In the cycle’s structure, speculative bubbles are necessary to provide funding and drive a new technology’s evolution. And so, each swell and ebb in Bitcoin’s price has shone a spotlight on the shortcomings of its ecosystem and provided a fresh infusion of investor funds to develop its infrastructure.

Previous analysis of Bitcoin’s price made the case that its price was a function of its velocity or its use as a currency for daily transactions and trading. But crypto trading volumes are a fraction of their mainstream counterparts, and Bitcoin never really took off as a medium of daily transaction.

Which Factors Influenced Early Bitcoin Trading?

During Bitcoin’s early days, liquidity was thin, and there were very few investors in cryptocurrency markets. This state of affairs translated to wide price swings when investors booked profits or when an adverse industry development, such as a ban on cryptocurrency exchanges, was reported. The rise and fall of cryptocurrency exchanges, which controlled considerable stashes of Bitcoin, also influenced Bitcoin’s price trajectory.

Events at Mt. Gox, one of the world’s first crypto exchanges, especially contributed to mercurial changes in Bitcoin’s price in 2014. For example, the price tumbled from $850 to $580, a decline of 32%, after the exchange claimed to have lost 850,000 bitcoins in a hack and filed for bankruptcy in February 2014. Even earlier, in December 2013, rumors of poor management and lax security practices at Mt. Gox had caused a steep drop of 29% in its price.

The other important factor affecting Bitcoin’s price in its early days was traction with mainstream online retailers: Its price crossed the $1,000 threshold in January 2014 after online retailer Overstock announced that it would begin accepting Bitcoin for purchases.

As ASIC mining operations began to take hold, the price of bitcoin began to follow its marginal cost of production, largely due to the cost of electricity needed to run mining equipment. As the Bitcoin network grew, so too did its mining difficulty, requiring ever-larger amounts of energy. Research has shown that the price of Bitcoin has largely followed its marginal cost of production.

Which Factors Influence Current Bitcoin Price?

In recent times, the matrix of factors affecting Bitcoin price has become considerably more complex. Starting in 2017, when Bitcoin garnered mainstream attention, regulatory developments have had an outsized impact on its price because it extends the cryptocurrency’s reach. Depending on whether it is positive or negative, each regulatory pronouncement increases or decreases prices for Bitcoin.

Interest from institutional investors has also cast an ever-lengthening shadow on Bitcoin price workings. In the past 10 years, Bitcoin has pivoted away from retail investors and become an attractive asset class for institutional investors. This is construed as a desirable development because it brings more liquidity into the ecosystem and tamps down volatility. The cryptocurrency’s most recent rally in 2020 occurred after several respected names in finance spoke approvingly of its potential to develop into a store of value to hedge against inflation from increased government spending during the pandemic. The use of Bitcoin for treasury management at companies also strengthened its price in 2020. MicroStrategy Inc. (MSTR) and Square Inc. (SQ) have both announced commitments to using Bitcoin instead of cash as part of their corporate treasuries.

Industry developments are the third major influence on Bitcoin’s price. Bitcoin’s unique underpinnings, which span tech and finance, mean that these developments pertain to both industries. For example, announcements of the launch of Bitcoin futures trading at the Chicago Mercantile Exchange (CME) and the CBOE Options Exchange (CBOE) were greeted with a price bump at crypto exchanges and helped push Bitcoin’s price closer to the $20,000 mark in 2017. Bitcoin halving events, in which the total supply of Bitcoin available in the market declines due to a reduction in miner rewards because of an algorithmic change, have also catalyzed price increases. The price of Bitcoin since the May 2020 halving has seen an increase of nearly 300%. Previous halving events in 2012 and 2016 produced significantly larger price gains of 8,000% and 600% respectively. Among many factors, the halving in the reward given to miners that also doubles the asset’s stock-to-flow ratio seems to have a large effect on Bitcoin’s price.

Finally, economic instability is another indicator of price changes for Bitcoin. Since its inception, the cryptocurrency has positioned itself as a supranational hedge against local economic instability and government-controlled fiat currency. According to reports, there is a period of increased economic activity on Bitcoin’s blockchain after an economy hits road bumps due to government policy. Countries like Venezuela, which have experienced hyperinflation of their currency, have seen huge increases in the use of Bitcoin as a means of transaction as well as storing wealth. This has led analysts to believe that the cryptocurrency’s price increases and global economic turmoil are connected. For example, capital controls announced by the Chinese government were generally accompanied by an uptick in Bitcoin’s price. The 2020 pandemic shutdown produced macroeconomic instability on a global scale and galvanized Bitcoin’s price, resulting in a record rally.

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