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Refreshing in: 60s | Wed, Jul 15, 07:06PM GMT
You may have heard success stories like the one about a man who bought $27 in bitcoin in 2009 and then found his purchase to be worth almost $900,000 a few years later. But, bitcoin’s value doesn’t always go up.
Imagine if you had bought a thousand bitcoins in late 2013 — when the cryptocurrency was worth more than $1,100 a pop — and then watched its value plummet below $200 in just over a year. Again, in late 2017, bitcoin peaked at nearly $20,000 before losing more than half of the value in the weeks that followed.
It’s tough to predict exactly how much bitcoin will be worth in the future. Let’s explore how bitcoin has grown over the years and where it might be headed.
Bitcoin hit a new high of nearly $20,000 in mid-December 2017.
However, it’s a notoriously volatile currency, and it’s difficult to know what bitcoin will be worth even a week from now, let alone a year from now. To have a shot at predicting the price, you need to know how the cryptocurrency is bought and sold, and what factors affect the price of bitcoin.
However, there might be two factors to consider above all others.
First, only 21 million bitcoin will ever be created. Throughout 2017, the number of bitcoin in circulation increased from about 16 million to 17 million, but it will slow down as it gets closer to the 21 million limit. The final bitcoin isn’t due to be mined until the year 2140.
This finite supply and its popularity increasing more quickly than its availability is thought to keep prices increasing.
Second, it’s important to remember that bitcoin is now just one cryptocurrency among hundreds. Although it’s the most valuable, bitcoin’s overall cryptocurrency “market share” is declining. Competing cryptocurrencies can offer some features that bitcoin can’t, and many people think another currency will eventually overtake bitcoin.
Many bitcoin proponents speculate that its limited supply will only increase the value of the cryptocurrency in the long run and is its greatest strength. But, critics say that this will be its undoing.
They point out that inherent scarcity is a useful way of controlling value but might be too impractical for bitcoin to ever become the standard global currency.
To judge for yourself whether it’s worth buying bitcoin, you may want to look at the history of its ups and downs to better understand the factors affecting its value.
|Bitcoin (BTC)||US dollars (USD)|
As was alluded to in the introduction, bitcoin’s price has fluctuated dramatically over the years. Cryptocurrencies, in general, are complex and speculative, meaning there’s an extremely high degree of risk. It’s important to consider all the factors that could affect any purchase of bitcoin.
Here are a few things that could affect the price of bitcoin:
Because bitcoin is a decentralized currency, the standards that dictate how to refer to it are still forming.
In its earliest days, bitcoin’s currency code was BTC. With its growing acceptance as a legitimate currency, though, the International Standards Organization (ISO) decided to designate bitcoin’s notation as XBT. Why the “X”? If a currency is not associated with a specific country or government, its three-letter note starts with an “X”.
However, XBT has yet to gain much adoption beyond the banking and finance industries. BTC seems to be what the everyday person and most enthusiasts prefer. As bitcoin’s legitimacy (and the general public’s interest in it) increases, you’ll continue to see references to both BTC and XBT until one eventually sticks as the standard.
The very first bitcoin transaction took place on January 12, 2009, between creator Satoshi Nakamoto and developer Hal Finney. On October 5, online publication New Liberty Standard pegged the bitcoin exchange rate at 1 USD = 1,309.03 BTC — a calculation based on the cost of electricity for a computer to create bitcoins.
July 2010 brought the founding of Mt. Gox, a bitcoin exchange that would eventually grow into the largest player in the market. We’ll start our bitcoin price history in 2011, using figures from CoinDesk’s price index.
Early in the year, one bitcoin finally became worth as much as one US dollar. In just a few months, the price of bitcoin shot past the $10 mark.
However, on June 19, Mt. Gox was hacked, causing customers to lose more than 4,000 BTC. Bitcoin’s value hovered around $30 for several days and began a slow descent to around $4 by the end of the year.
Bitcoin experienced a recovery in 2012. The cryptocurrency didn’t hit the same heights that it did the previous year, but it climbed back into the double digits by the end of the year.
June saw the founding of Coinbase, which is one of the largest bitcoin platforms today. In November, the publishing tool WordPress began accepting bitcoin as payment.
In February, bitcoin surpassed its previous all-time high and then abandoned the $30 range as it continued growing in value.
At the same time, Mt. Gox was failing as bitcoin transactions overwhelmed its servers. Ross Ulbricht, the founder of dark web marketplace Silk Road (where bitcoin is used frequently), was arrested by the FBI on October 1. In the same month, bitcoin broke the $200 mark, and then it shot past $1,000 within a month.
Chinese investment in bitcoin pushed the price of the cryptocurrency even higher. But, the largest ever theft of bitcoins occurred in December: 96,000 BTC from Sheep Marketplace. What’s worse, China banned its financial institutions from processing bitcoin transactions.
Bitcoin’s price euphoria came to an abrupt end, and the cryptocurrency steadily lost value over a year. Mt. Gox finally shuttered its doors. However, Microsoft and PayPal-owned Braintree started accepting bitcoin as payment.
In late January, Coinbase launched its bitcoin trading platform. At the same time, Ross Ulbricht got life in prison and Mt. Gox’s CEO, Mark Karpeles, was arrested.
But, the European Court of Justice ruled that bitcoin is currency, not property and that the cryptocurrency would not be assessed a value-added tax in the European Union. Bitcoin’s price broke the $400 mark toward the end of the year.
The marketplace software OpenBazaar was released over the summer. It’s a peer-to-peer platform on which users can buy goods with bitcoin. Bitcoin’s price, in recovery mode at the beginning of the year, approached its former glory as it hovered around $1,000.
Bitcoin rose slowly from less than $1,000 early in the year to $5,000 in October, $10,000 at the end of November, $15,000 a week later and nearly $20,000 by mid-December before tumbling back to less than $14,000 in the final days of the year.
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