The very first block of the blockchain, Bitcoin’s Genesis Block, was mined by Satoshi on January 3rd, 2009. In the eight years since, bitcoin has grown from a valueless libertarian fantasy to crossing the US$1,000 line on Jan 1st. Since that time, bitcoin’s price has tested its’ new floor several times and mostly stayed above it, using the round-numbered level as a solid platform to build on.
In Bitcoin’s entire existence it had only been worth more than $1,000 for a grand total of nine days prior to this year according to Bitstamp, or 12 days on MtGox, where users were never able to withdraw any of those gains. The price of bitcoin was in a very steeply-climbing speculative bubble last time, which had the price rising faster than $100 per day, several days in a row. Although the price has risen quickly this time around, the chart looks very different.
The recent rise also coincides with increased volumes at exchanges around the world. The chart below shows that USD volume picked up in October, while many other currencies from around the world have also had growing volumes. Bitcoin investor Barry Silbert set twitter ablaze when he described bitcoin’s global monthly volumes on Saturday: “Best part of having invested in 19 bitcoin exchanges around the world is we get to see their monthly volumes... Folks, it is happening”
Very rarely has slow, organic growth resulted in a large percentage increase in bitcoin’s price. Over most of the nascent currencies eight-year history bitcoin has grown in speculative bubbles, with values jumping anywhere from eight to thirty times in a very short period of time.
So far, bitcoin has had four of these bubbles. The first was in 2010, on the short-lived low-tech exchange called The Bitcoin Market. Just a few months after the famous “Pizza day,” when bitcoin was first traded for money, Bitcoin Market was just starting to make daily trades. Some of the earliest bitcoiners posted about the pizza event, and about bitcoin’s latest version upgrade on popular developer hangout SlashDot. The resulting flood of new bitcoiners the next day drove bitcoin’s price up from eight-tenths of a cent to eight whole cents in one day. The 10x bubble popped over the next few days and settled around six cents, soon after MtGox started allowing trading on their prettier, real-time exchange.
The next bubble happened the following summer, on June 8, 2011, and followed bitcoin’s first mainstream article, published by Wired Magazine, about the opening of the Silk Road marketplace. Dubbed The Great Bubble of 2011, the price frenzy saw MtGox’s price quickly pass US dollar parity, reaching a new high of US$31.91. A quick drop-off led to further declines and over the next few months bitcoin lost 93 percent of the hype-inflated value.
2012 came and passed with very little growth, but 2013 was action-packed. The events started in March, when the US Financial Crimes Enforcement Network issued Bitcoin’s first official US guidance. Throughout much of March and April, the Cyprus haircut led news headlines. Speculation on this and other news drove the price of bitcoin to $266 on April 10 2013, a new high that seemed like vindication to bitcoiners for a few short days. Unfortunately, once again, the speculation-driven bull run on MtGox soon lost steam and crashed to around $100.
The world wouldn’t have to wait long for its next bubble. MtGox’s CEO Mark Karpeles was allegedly using a pair of trading bots to fake volume at his exchange. The volume attracted the investors and global speculation had gone into overdrive by November.
The price of a bitcoin very quickly went from $200 to over a thousand. Many bitcoiners were already dreaming of mainstream adoption, but again, all of the value was speculation. Bitcoin’s all-time high occurred on November 28, 2013, when MtGox listed each bitcoin for $1,242. At Bitstamp, BitFinex, and other exchanges, the price was a bit lower, but still peaked above $1,100.
MtGox then collapsed, and most of their customer’s funds were stolen. The entire year of 2014 was then a slow downhill trip. Volumes picked up throughout most of the year, while the price dove from the lofty highs in early January down to $207 on Bitstamp a year later on January 15, 2015.
BTC China, the oldest bitcoin exchange still in service today, was the source of the majority of bitcoin’s volume starting around the top of the last peak. Fast forward three years and BTC China is still a leader in global bitcoin sales volumes, often moving over two million bitcoins a day.
CEO Bobbie Lee often attributes the price of bitcoin going up with his countryman’s dissatisfaction with the Chinese Yuan depreciation, an occurrence that has happened more than a few times recently.
“The investment spree is well-founded because of the rarity of bitcoins,” BTCC’s CEO, Bobbie Lee told the South China Morning Post. “The increasing need for hedging against the yuan’s depreciation and the central banks’ continued printing of money have convinced investors’ of the bitcoin’s investment value.” Coincidentally, the Yuan’s value has been steadily falling against the dollar since January 2014, when bitcoin fell off of its’ peak.
Today’s global market volumes flow very differently than they did in Bitcoin’s humble beginnings. Both the Bitcoin Market and MtGox were US Dollar-denominated exchanges, despite MtGox being located in Japan. China overtook the USD during the last price peak, and in May of this year, Japan sprinted past the dollar as well, cementing 95 to 98 percent of bitcoin’s daily trading volume in Asia.
Following behind the dollar is the Euro, the Korean Won, and the Russian Ruble. Several recent growth markets don’t even make the top ten chart, such as India, which despite their recent demonetization problems only ranks 13th.
Although no one knows what will happen with bitcoin’s price during its ninth year, mainstream investment vehicles including the Winklevoss Investment ETF are due to launch sometime during 2017, which could allow Wall Street investment fund managers to include bitcoin in their enormous investment funds.