Since Bitcoin was introduced and began to be accepted and traded in 2009, its price has fluctuated, experiencing multiple price peaks, as well as multiple drops of over 50%. There is no denying that the price of Bitcoin is often influenced by politics, economics, and regulation, as well as market sentiment. However, this has not affected Bitcoin's popularity and growth on a macro level.
As of May 2023, Bitcoin remains the highest market capitalization cryptocurrency in the cryptocurrency market, with a current price of around $19,500 for one bitcoin, and a market capitalization of $560 billion despite having fallen more than 75% from its previous high of 69,000.
Bitcoin Launched: Reaching $1 in 2 years
Bitcoin, as the first cryptocurrency, was launched without a price and therefore could not be exchanged for legal tender or physical items. Only a very small number of participants verified bookkeeping and transactions via their own personal computers or sent them to each other from different wallet addresses. For a significant period of time after its launch, the rewards for participating in bitcoin mining were not even enough to cover the power costs of operating an average personal computer device.
On May 18, 2010, Laszlo Hanyecz, an American software engineer, posted on a Bitcoin forum seeking someone who would deliver two pizzas for him, and offered to pay 10,000 bitcoins as payment. This is the first time in history that a commodity has been purchased directly with cryptocurrency. At the time, 10,000 bitcoins could be exchanged for $41 on the internet.
In early 2011, the Electronic Frontier Foundation in California publicly announced that it was accepting bitcoin donations, and over the next six months, the price of bitcoin rose dramatically, breaking the $1 for the first time in February 2011. After several weeks of sharp rallies, a new all-time high of $30 USD was quoted on Mt. Gox, the world's largest bitcoin exchange at the time. But shortly afterwards, the foundation issued a statement to stop accepting bitcoin donations and cut its ties to bitcoin in a hurry. Bitcoin saw its first bear market, with the price dropping over 90% in six months and hovering around $5 for a long time.
Bitcoin Halving: Driving Prices Up Again
On November 28, 2012, the first official halving of Bitcoin's production officially took place. Driven by positive news such as a reduction in supply and the Electronic Frontier Foundation once again announcing that it would accept Bitcoin donations, the price of Bitcoin rose from $13, and after reaching a high of $250 in April, it surged again to a record high of $1,100, which was on par with the price of an ounce of The price of gold was on par with the price of an ounce of gold at the time, and Bitcoin's market cap reached $1 billion for the first time.
In late 2013, the FBI shut down Silk Road, the most popular dark network for online bitcoin payments, shortly after another anonymous marketplace, Sheep Marketplace, was hacked and 96,000 bitcoins were stolen. The following year, in late February, the exchange Mt. Gox also declared bankruptcy after hackers stole 850,000 bitcoins, a series of negative news that sent bitcoin into a second bear market, with the price of bitcoin falling below $300 at one point.
Bitcoin's price hovered around $200-$300 for the next nearly two years of the bear market. With Bitcoin seeing a second halving of production on July 19, 2016, the price stabilized and recovered, managing to break through $1,100 in mid-April 2017 and breaking market rumors that 1 BTC could not possibly exceed the price of 1 ounce of gold.
From Entering the Mainstream to the First Mining Crash
As the price of Bitcoin continues to rise, it has attracted the attention of more traditional markets. At the same time, news of the Bitcoin contract being listed on the Chicago Mercantile Exchange pushed the price to a high of $20,000, and Bitcoin's return on investment was as high as 20x in 2017.
The staggering rise in the price of bitcoin has attracted more miners and led to the rapid rise of the mining industry, with many people buying equipment and starting to work as bitcoin miners. Since the end of 2017, the arithmetic difficulty of the Bitcoin network has skyrocketed, and Bitcoin mining has evolved into an "arms race" for equipment. But in order to pay for the huge depreciation and electricity costs of the equipment, many miners have been selling off, causing the price of bitcoin to plummet. At the end of 2018, bitcoin was down to just $3,000, and many miners were forced to sell their equipment in what has been joked about as the first mining disaster in bitcoin history.
Loose Monetary Policy to Save the Economy, Market Goes Bullish
Due to the impact of the Coronavirus epidemic on the economies of countries around the world, governments have been implementing loose monetary policies. A large amount of money was invested, causing the stock market and cryptocurrencies to rocket upwards. At the same time, the price of bitcoin began to bottom out after the third halving of production, soaring from $4,000 to a new high of $30,000 by the end of the year.
The countries' measures to deflate and print money to save the market created inflationary pressures. Many large institutions such as Microstrategy, Tesla, and Galaxy Digital Holdings purchased bitcoin as a form of investment. That same year, the U.S. exchange Coinbase was officially listed on NASDAQ in New York, and Bitcoin hit a high of $64,000, reaching a high of $68,000 after the SEC approved the first futures ETF, and Bitcoin's market cap topped a trillion dollars for the first time.
Changing Macro Environment and Internal Crisis in the Crypto Industry
In early 2022, due to the financial market's concern about inflation and the Fed's rate hike expectations, international events such as the outbreak of the war between Russia and Ukraine in February of the same year, capital gradually withdrew from the cryptocurrency market, and in May of the same year, the then-hot projects LUNA and UST experienced a major collapse, leading to the bankruptcy of the large crypto fund Three Arrow Capital and the subsequent liquidation of a chain of institutions. The continued selling during liquidation caused the price of bitcoin to fall further. At one point, it fell as low as $17,000.
In November of the same year, CoinDesk published a report revealing that Alameda Research, a team of market makers, had used illiquid FTT collateral to obtain large loans from FTX exchanges, raising questions in the cryptocurrency market about FTX exchanges' failure to disclose leverage and ability to repay. There was a massive panic withdrawal run on users. Within 10 days, the FTX exchange was unable to withdraw funds due to unauthorized access to customer assets and eventually declared bankruptcy, triggering another crash in the cryptocurrency market as bitcoin broke down to $15,600.
Crypto investment involves significant risks. Please proceed with caution. The course shall not be considered investment or financial advice.