After Bitcoin hit 20,000 USD in December 2017, a huge correction followed. Throughout the whole of 2018, it has been on a steady decline with a few minor spikes. Are things as bad as they seem? Mass media has buried Bitcoin over 300 times, but this cryptocurrency is still afloat, and other serious blockchain projects continue their development.
What were the major Bitcoin rises and crashes since its creation in 2008? What lessons can we learn from these bubbles? We’ve decided to investigate the matter and also find out the reasons behind Bitcoin’s spikes and declines.
June 8-12, 2011
Bitcoin price rises from 8 to 32 USD in 8 days.
Bitcoin price drops -68% in 3 days, -94% in 5 months.
In 2011, Bitcoin was mostly traded on an ill-fated exchange MtGox that has been hacked several times throughout its history. And this is exactly what happened in June 2011.
An anonymous hacker got access to the platform, supposedly through a compromised PC that belonged to an auditor of the company. The hacker used a traditional scheme: first, the nominal value of Bitcoin was artificially set to be 1 cent. Then, around 650 bitcoin were purchased from the platform at this price, and in addition, a huge sum of bitcoins (estimated 2000 BTC) was transferred from users’ accounts on the exchange. After that, all the stolen bitcoins were sold off at the normal price.
The hack stimulated Mt Gox to enhance security measures. After this event, the platform moved a substantial amount of digital currency to be kept offline on cold storage.
August 17-19, 2012
Bitcoin price rises from 9 to 15 USD in 2 months.
Bitcoin price drops -33% in a few minutes, -51% in 2 days.
Bitcoin had almost fully recovered its positions from 2 USD in November 2011 to 11 USD in August 2012. On August 19, the Bitcoin price peaked at 15.25 USD and then fell to 10 USD in a matter of a few minutes. In the following two days, the price went as low as 7.5 USD.
One of the reasons behind this abrupt fall is supposedly the crush of a Bitcoin Ponzi scheme called Bitcoin Savings and Trust. The owner of the company ran away into the blue leaving the enterprise with debts of almost 5.6 million USD in bitcoins and investors with empty hands.
March 6 and 11, 2013
Bitcoin price rises from 30 to 49 USD in 10 days.
Bitcoin price drops -33% in a few minutes, a few days later one more abrupt dropping by -27%.
The year 2013 was marked by incredible growth of cryptocurrencies. No one ever before could have made such bold Bitcoin price predictions. At the beginning of March, the first digital coin’s price was already twice as big as the all-time-high of the previous year, and it added 50% more in a week.
Then on March 6th, BTC price abruptly fell by 33% in a few minutes recovering to practically the same level in the following hours. Then the same abrupt fall and rise occurred a few days later, on March 11th probably causing Bitcoin investors to hold their breath.
The supposed reason for these crashes was the bug in the code. However, they didn’t have any significant impact on the following growth.
April 10, 2013
BTC peak price: 266 USD.
BTC price drops -61% in a couple of hours, it took cryptos seven months to recover this time.
As Bitcoin’s popularity grew over time, the most popular crypto exchange Mt Gox stopped being able to handle such a huge volume of visitors. Eventually, this led to processing delays. After Bitcoin’s bull run that continued for about a week, the servers reached their maximum capacity which caused 70-minute delays between users making an order and the order being fulfilled.
This led to the panic on exchange and immediate BTC price drop by 61%.
November 30, 2013
BTC peak price: 1,154 USD.
BTC price drops -63% in 3 weeks, four years to recover.
After a relatively stable summer with BTC price hanging around 120 USD for several months, the digital currency started again to surge upwards closer to the end of the year. As BTC price met another bull run in November, Forbes even named 2013 the year of Bitcoin. (They couldn’t have made a correct Bitcoin price prediction to see what was going to happen in 4 years after that, no one could.)
The celebration ended abruptly in December as the BTC correction followed this crazy rally. This time the reason was nothing but a bubble burst. Investors were too eager to buy BTC, especially in the light of regulators’ positive view and Coinbase providing new Bitcoin users with easy entrance. On December 5, China put a total ban on cryptocurrencies, and the whole crypto market faced the downtrend that lasted for four years.
Mt Gox hack on February 7, 2014
As if it was not enough for BTC enthusiasts. On the bear market that has obviously taken over November rally, an additional blow came from the most famous at that time Japanese exchange platform Mt Gox.
On February 7, the platform ceased all withdrawals and revealed that 850,000 BTC (~850 million USD at that time) had been stolen due to a security breach. The news caused BTC price drop from around 1,000 USD below 150 USD on Mt Gox itself. The platform couldn’t have revived after this blow and stopped all operations.
The market average was affected to a smaller extent as the price decreased from 800 USD to 650 USD.
December 22, 2017
Bitcoin has been growing all through 2017. It started the year at the 974 USD mark and reached its historical maximum of 20,052 USD on December 17. The correction followed right after that, and in the following five days, Bitcoin lost 51% of its price dropping down to the level of 11,833 USD.
The year 2017 has been significant not only for Bitcoin. Ethereum has gained huge popularity, too, as it provided IT startups with a very convenient tool for fundraising via ICO (Initial Coin Offering). Altcoins, such as Monero, ZCash, OmiseGO, Ripple and all other 1000+ currencies presented at CoinMarketCap followed the market leader and increased in price just as well. The market cap reached its highest level of 831 billion USD on January 3.
Crypto enthusiasts were overwhelmed with joy; positive price predictions were boldly spoken out by public people. John McAfee made a very brave bet for Bitcoin reaching 500,000 USD by 2020.
if not, I will eat my dick on national television.
— John McAfee (@officialmcafee) July 17, 2017
However, this bubble met the same fate as all those that went before. All bright BTC forecasts were smashed into the wall by the horrible recession that has been lasting for the whole of 2018 and seemingly hasn’t ended yet.
What lessons we can learn
First, the crypto market is fully manipulative. Since there are no central banks to control the decentralized currency, other forces come out to do the job. Those who saw the potential of future gains and purchased a big share of BTC while it was at its lowest now have the power to manipulate the market. Satoshi Nakamoto, whoever he is, has created a truly genius tool for making money outside of the authorities’ everlasting sight.
Next, every new correction takes longer than the previous one. As Bitcoin gains popularity, the system becomes more inert. Huge rallies start only when the system stays quiet for a pretty long period of time. Now that only a year has passed since the last peak, the market is still too boisterous, so we may yet see new bottoms.
Finally, you should never give in to emotions and go purchase cryptocurrencies together with the crowd. Whatever Bitcoin forecast you hear just pass it by and follow your own strategy. If you’ve set your mind to become a crypto investor, make your own research and make your decisions based on what you know and see yourself. Most likely, BTC is yet to see the new heights, but no one can say for sure when it’s going to happen.