The first Bitcoins were issued back in January 2009, when Bitcoin’s mysterious founder Satoshi Nakamoto mined the cryptocurrency for the first time. Originally, the new digital currency had no estimated value attached to it like it now has but was mostly traded between holders out of enthusiasm for the new technology or for small amounts of money.
Fast forward to 2017, Bitcoin touched spectacular highs, at one point getting even close to a value of $20,000 per 1 Bitcoin. Considering its original selling price was less than $1, it doesn’t take much to figure out the profits made by those who invested early on.
So, how has this technological innovation grown to become an asset with a value that surpassed the price of an ounce of gold? Did it always do so well in the trading markets? Find answers to these questions and more by checking out our retrospective on Bitcoin’s price and the factors that affect it.
The History of Bitcoin Price
One of the first known attempts to ascribe a value to the coins came in 2010 when a user launched an auction for 10,000 BTC online, asking nothing more than $50 in return for the entire batch. His attempt was unsuccessful, so it wasn’t until one of the first exchanges – BitcoinMarket.com – started trading Bitcoin weeks later that its first “official” value of $0.003 was established.
After the only vulnerability issue in Bitcoin’s blockchain was fixed in 2010, Bitcoin continued being mined and traded throughout the year and inspired the appearance of other cryptocurrencies. The next year saw Bitcoin’s acceptance for donations by the non-profit Electronic Frontier Foundation, and then WikiLeaks, which in turn inspired other organizations to adopt the cryptocurrency.
It was during this period that Bitcoin’s price first equaled the price of $1 and later increased to a then-high of $31. This price peak also brought one of the first examples of Bitcoin’s volatility and the cryptocurrency ended the year with a price point of only $2 several months later.
2013 and the Mt.Gox Scandal
Another eventful year for Bitcoin was 2013 when its price was moving around the $100 range for most of the year before starting to grow rapidly at the beginning of autumn. It was during this time that it broke out of $1,000, swinging wildly between November and December, only to end the year near $800.
But one of its most trying periods came afterward, in 2014, when Bitcoin entered January by moving close to $900 and news broke out of several high-profile companies looking into the cryptocurrency. The peak was short-lived, though, as only weeks later the Japanese Mt.Gox exchange announced first to be stopping withdrawals and then to be officially filing for bankruptcy.
Mt.Gox was one of the biggest Bitcoin exchanges at the time in terms of trading volume and its eventual closure due to a reported hack had a major effect on the cryptocurrency. Plagued long before with withdrawal delays and even an $8.75 million hack in 2011, when Mt. Gox finally shut doors and admitted to having lost 850,000 Bitcoins from its users, the price began to plummet.
2017 – Year of New Frontiers
But the most notable year for Bitcoin has to be 2017. Prior to the year’s start, Bitcoin was moving between $400 and $800, where it ended 2016. There were several factors driving this uptick, most importantly Bitcoin’s acceptance into the mainstream driven by companies like Steam and the Swiss Railways, as well as expansions on other fronts like ATMs.
Come January 2017, Bitcoin’s price jumped to $1,100 only to be followed by a correction that took it back to former levels. In March the same year, the price broke its all-time high for the first time when it hit $1,290. The following months were filled with record after record as Bitcoin hit $2,000, $4,000, and $7,000 by the start of November, and then continued growing to hit a pinnacle of $20,000 in December.
What Affects the Price of Bitcoin?
Like traditional currencies, the price of Bitcoin can be affected by geopolitical factors. However, its existence outside of any government regulation has also made it resistant to some of these traditional influences as well as more subjective to other factors like the media’s influence. The following are only some of the main factors that have been known to drive the price up and down thus far.
The Chinese, South Korean, and Japanese markets have played a major role in shaping the price of Bitcoin due to the high percentage of trades they account for. ICO bans in China, legalizations in Japan, and the trading boom in South Korea have all had an effect on the price in recent years, sometimes even single-handedly pushing it upwards.
Regulation and Interest from Traditional Sectors
Regulatory changes like criminalizing Bitcoin, introducing high taxes for it, and liberating its use have also had an effect on the price, especially if such a change was introduced in a major market. At the same time, its adoption into traditional financial sectors like futures exchanges, stock market exchanges, or major global corporations has been known to trigger positive market trends.
Media Influence and Psychology
High-profile tech media, internet forums, or the opinions from key figures in the Bitcoin sector have likewise had a direct effect on market trends throughout Bitcoin’s history. There are many investors who have little knowledge of technical- and data analysis and tend to “follow the herd”, which can often lead to a buying/selling chain reaction that starts with a simple warning or an unconfirmed rumor.
Bitcoin’s 2017 price jumps show a correlation with the positive coverage the cryptocurrency had received from traditional media houses, just as its price declines can be linked to the spread of fear or warnings among traders. Still, the effect of media can’t be said to be as strong as it was in the early days.
Fall of Traditional Currencies
Bitcoin, for many, is an investment that can transcend borders, resist domestic problems, and grow significantly with time. Direct links to an increase in interest for Bitcoin and the weakening of national currencies have been noted in Greece during the financial crisis, Venezuela in its years-long Bolivar decline, the USA after Trump’s election, and the UK following the Brexit, to name a few.