In just over a decade, bitcoin has grown a cult-like following and surged to an all-time high of US$48,200.
It’s been just over 13 years since the world’s first digital currency was introduced.
In a little more than a decade, bitcoin has paved the way for the growing cryptocurrency asset class, amassing a cult-like following and surging to an all-time high of US$48,200 on February 9, 2021.
But it hasn’t been all highs for bitcoin. Created to counter the 2008 financial crisis, it has weathered extreme volatility, spiking to US$19,650 in 2017 before spending years locked below US$10,000.
Unveiled in late 2008, the cryptocurrency was meant to revolutionize the monetary system, and was first introduced in a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
Penned by a notoriously elusive person (or persons) named Satoshi Nakamoto, the nine page manifesto lays out a compelling argument and groundwork for the creation of a cyber-currency.
Cryptographically secured, the peer-to-peer electronic payment system was designed to be transparent and resistant to censorship. Using the power of blockchain technology to create an immutable ledger preventing double spending, the true allure for bitcoin’s early adopters was in its potential to wrestle power away from banks and financial institutes and give it to the masses.
This was especially enticing as the fallout from the 2008 financial collapse ricocheted internationally. Described as the worst financial crisis since the Great Depression, US$7.4 billion in value was erased from the US stock market in 11 months, while the global economy shrank by an estimated US$ 2 trillion.
Bitcoin price history: A response to the 2008 financial crisis
In July 2010, bitcoin began trading at a value of US$0.0008, climbing to US$0.08 by month’s end. The cryptocurrency performed relatively flatly until spiking to US$250 in April 2013.
Bitcoin price performance, 2010 to 2021. Chart via Trading Economics.
As bitcoin’s notoriety began to grow, so did knowledge of the elusive, intangible asset. Unlike a dollar, which works as a single unit of currency, bitcoin’s value was fluctuating from US$0 to US$250.
This new money required a new measurement system using units called millibitcoins (mBTC), microbitcoins (uBTC) and satoshis (in honor of the white paper author). Broken down, one bitcoin is equivalent to 1,000 mBTC, 1,000,000 uBTC or 100,000,000 satoshis.
By the end of 2013, bitcoin had reached a fresh new high of US$1,164.
But the cyber-cash asset still had a long way to go before reaching its 2021 peak, and it moved much lower before going higher — between 2014 and 2015, stagnation and volatility chipped away at the crypto’s value, reducing it to US$245 by October 2015.
Bitcoin price history: COVID-19 propels coin higher
January 1, 2016, marked the beginning of bitcoin’s sustained price rise. It started the year at US$433 and ended it at US$959 — a 121 percent value increase in 12 months.
The next year brought the mainstream adoption of bitcoin, which also benefited its performance. Between January and December 2017, additional attention, the introduction of new cryptocurrencies and coverage from mainstream financial media added 1,729 percent to the crypto-coin’s value — it rose from US$1,035.24 in January to US$18,940.57 in December.
This record-setting threshold was ultimately unsustainable, and bitcoin fell victim to its own routine volatility, which steadily eroded its previous gains. Despite that decrease in value, the virtual currency held above US$3,190, its lowest point in the last three years.
Since launching in 2008, opponents of bitcoin have used the digital currency’s short history to defend their reluctance to support the new asset. Questions have arisen around how bitcoin would perform during a financial crisis or recession, as the coin is extremely susceptible to uncertainty.
2020 proved a testing ground for the digital coin’s ability to weather financial upheaval. Starting the year at US$6,950.56, a widespread selloff in March brought its value to US$4,841.67 — a 30 percent decline.
The low created a buying opportunity that helped bitcoin gain back its losses by May. Like safe haven gold, bitcoin began to emerge as a protective asset for the Millennial and Generation Z crowd.
The rally continued throughout 2020, and the digital asset ended the year at US$29,402.64 a 323 percent year-over-year increase and a 507 percent rise from its March drop.
By comparison, gold, one of the best-performing commodities of 2020, added 38 percent to its value from the low in March through December, setting an all-time high of US$2,060 per ounce in August.
Bitcoin’s ascent has continued in 2021 — as mentioned, it hit an all-new high of US$48,200 on February 9.
Much of the growth this year has been attributed to investor appetite, as well as Tesla’s (NASDAQ:TSLA) announcement that it has purchased US$1.5 billion in bitcoin. Activity was further compounded when Tesla reported it plans to begin accepting bitcoin as payment for its electric vehicles.
Bitcoin’s mainstream acceptance may be a continued price catalyst as more businesses like Tesla look to accept the digital token as payment. In terms of headwinds, the lack of places where the cryptocurrency can be spent continues to be a drawback, as is the volatility associated with it.
Regardless, bitcoin’s potential is hard to deny. In the 13 years since its inception, it has climbed exponentially from US$0.08 to US$48,200. Gold, the closest comparable asset to cryptocurrencies, has risen just 627 percent over the last 100 years (US$283 in January 1921 to US$2,060 in August 2020.)
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.