Things look pretty bleak in the crypto world right now. Bitcoin’s price has declined by over 80% after reaching an all-time high last year. The anticipated flood of institutional investment has not come to pass, and millions of people have lost money. Is there any reason for optimism, or is the crypto party over for good?
Today, I’m going to give a brief history lesson on bitcoin price swings that will put the current crash in perspective and offer a sense of what could happen to BTC prices in the next few years.
We’ve been here before.
Bitcoin gained mainstream attention in 2017, and for many people, the meteoric growth and subsequent crash this year are their only experience with cryptocurrency. The truth, however, is that there have actually been several crashes before, and while each time was painful, bitcoin always came back stronger.
When Bitcoin (BTC) first appeared, it was essentially worthless; the going price was fractions of a penny, and there were no exchanges on which users could buy and sell. It was more a hobby among a small community of cryptography and technology enthusiasts than anything else. It might seem hard to believe now, but in March of 2010, a user on the Bitcointalk forum named “SmokeTooMuch” tried to auction off 10,000 BTC for $50 — and was unable to find a buyer.
Soon, however, something changed: A mere two months after this failed auction, BTC’s price rose to $0.01 USD. Soon after, the price hovered around $0.07 for several months, before shooting up to a high of $0.39 for 2010. From less than a penny to 39 cents each in just a few months, it was not bad at all. If you had taken SmokeTooMuch up on his offer and invested $50 in BTC, you would have been sitting pretty. But things were just getting warmed up.
In early 2011, BTC finally broke $1.00. This was a major psychological barrier for a lot of early investors, and when it held, we were off to the races. On June 29, 2011, BTC reached an all-time high of $29.60. If you still had those 10,000 BTC, that $50 would have turned into $296,000.
But then, just as quickly as it rose, the price began to drop rapidly. The first bitcoin bubble had burst, and by year’s end, BTC stood at a mere $4.72. If you’d bought at the top, you got burned. But if you had bought only a year earlier, you’d still have reaped a roughly 15x return. That was bubble No. 1.
For the next year and a half, BTC would hover between $4 and $6 before a new, slow upward growth trajectory began in June of 2012. Six months later, history repeated itself. With little warning, BTC’s price began to skyrocket. Between January 1 and April 1 of 2013, BTC rose from $13.30 to $104.
Another important psychological barrier had been broken, and within a mere nine days, BTC shot up to a staggering $230. Obviously the market was a bit overheated, and the price quickly corrected back to the $80-100 range, where it would remain for the next several months.
It was now early October 2013, and one BTC was going for around $100. Bitcoin was about to go into hyperdrive.
In just over 60 days, BTC shot up from $100 to a new all-time high of $1,147.25 on December 4th — over 1000% growth in only two months and about 8000% growth in less than a year. If you were one of the few who timed the market correctly, you made off like bandit. Many, however, did not, and when the inevitable correction followed, many people became disillusioned.
Over the next two years, BTC’s price declined, settling at a floor around $220-$240 in the summer of 2015. Once again, in October, BTC began to climb, ending the year at $430.05. Slowly, interest in Bitcoin was beginning to rekindle, and the price continued to climb throughout 2016.
This was also the time period when Ethereum began gaining popularity, and ICOs began to take off. While many altcoins offered much higher ROI than BTC, Bitcoin continued to hold the largest market capitalization.
Bitcoin continued to rise throughout 2016, and in 2017 … well, we all know what happened then. Bitcoin’s bubble burst again in January 2018, and we’ve been dealing with the aftermath ever since.
What’s the takeaway from all this?
What was the point of this history lesson? I’m making the point that this has happened before, and no matter how much the crypto skeptics want to dance on bitcoin’s grave, in my opinion, this is not the end.
More importantly, a trend should be obvious: new highs, followed by major corrections, but each time the new “low” is significantly higher than the previous low.
Right now, it’s clear we’re in a “low” period. At the time of this writing, BTC’s price seems to have plateaued between $3200 and $3500. If history is any indicator, we could be in for a rough couple of years in which BTC hovers in this range before it starts to rise again. In the long term, it’s possible that Bitcoin may not only recover but vastly surpass the previous all-time high near $20,000. Understanding Bitcoin’s growth over the past decade shows this is indeed plausible.
As for altcoins? It’s much more of a mixed bag. Many of these projects will, in all likelihood, never recover from the crash. Altcoins that are bringing real value to the table, however, may indeed go on to do great things.
As someone who’s worked in this industry since 2012 and endured the last two crashes, I can only say this: “High” periods are when everyone believes in cryptocurrency. The low periods are when we learn who really believes in this technology.