The Many false deaths of Bitcoin
September of 2017 saw Bitcoin reach an all-time high of $20,000, crossing over Rs.14 Lacs across exchanges in India. Subsequently, a record number of users jumped aboard the Bitcoin buzz with reports indicating that India accounted for nearly 11% of the global crypto-trade. Following the New Year there has been a precipitous drop in the Bitcoin price, bottoming out at about $6,000. The volatility comes as a massive shock, especially to the newcomers while oddly enough, it does not seem to boggle the early adopters and the good chunk of well-informed Bitcoin community as much. Why is that so?
Bitcoin has gone through its fair share of volatilities since early 2011 when it first hit $1. We have put together some of the major price drops that Bitcoin has seen over the years that saw mainstream media and sceptics hasten to label as the “Death of Bitcoin”. We hope in its entirety, the article lets you better assess for yourself why Bitcoin might just be here to stay.
2011
Early 2011- Bitcoin reaches $1 for the first time and gains massive traction, reaching its first all time high of $32 (all-time high for 2011), recording a 96% growth.
On 9th June 2011, Mt. Gox the largest Bitcoin exchange at the time, based out of Japan, was hacked resulting in a $9 million loss. The loss and the panic that ensued as mainstream media picked on the news, resulted in the first major “crash” of Bitcoin.
Over the course of the next 6 months, Bitcoin price hit $2, resulting in a dropping 94% drop and causing concerns to those outside the core Bitcoin community. Bitcoin faced its first false death, and it was declared to be nothing more than a failed experiment.
2012
In January, Bitcoin price regained a slow momentum to $7 as proponents within the Bitcoin core community grew.
In March of 2012, the steady growth was tested again as news of another Bitcoin hack became mainstream. This time Linode, a U.S. based cloud hosting company was hacked resulting in 46,653 Bitcoin being stolen. As reports of the hack spread, Bitcoin price dropped by 57% to $4.
Yet again, Bitcoin was presumed to be done with. It did however go ahead to reach $14 in August of 2012, recording a 28% growth (all-time high for the year)
2013
In March 2013, Cyprus was making headlines as they requested a $13 Billion bailout from the EU and IMF. To meet the terms of the loan, the Cyprus Central bank had to raise $7.5 Billion by taxing deposits. Subsequently, large depositors ended up losing close to 10% of the capital they held with the bank. Panic struck as banks across the country were forced to shut down. The Cyprus hysteria caused the potential of a decentralised cryptocurrency like Bitcoin, that is not owned by a government or a single entity, to come into the spotlight.
Piggybacking on the Cyprus news, in April 2013, Bitcoin reached a new all-time high of $266. In a matter of two days Bitcoin dropped then dropped by 79% to $54 as Mt. Gox halted its services later proclaiming that they were under a DDos attack.
In October 2013, Silk Road was shut down by the FBI who then seized Bitcoin. Silk Road, the infamous online marketplace was a part of the dark web. Users could anonymously browse the marketplace and conduct illegitimate activities, primarily to purchase drugs. The pseudo-anonymity of Bitcoin suited the amoral marketplace and was hence being used to conduct a large number of transactions. With the news of the shut down and Mt. Gox resumig its services soon after, the markets began to rally with Bitcoin surpassing the $1,000 mark for the first time on 27 November 2013. Bitcoin went further up to reach an all-time high of $1,200 due to increased demand in China.
The optimism was short-lived as on December 5 2013, the People’s Republic of China banned Bitcoin from being used for transactions. Bitcoin dropped by 30% closing the year at around $850.
Media, yet again: “Is this the end of Bitcoin?”
2014– 2015
On 7th February 2014, Mt. Gox halted withdrawals as they revealed being victims to a hack that resulted in more than 850,000 Bitcoin being stolen. By end of February, Mt. Gox filed for bankruptcy. Bitcoin prices dipped close to the $560 mark, an additional 35% drop following the China ban on Bitcoin.
On April 10 2014, Bitcoin plummeted a further 30% as two major Chinese exchanges announced that their trading accounts with banks would be closed down resulting in withdrawals being frozen.
Just days into 2015, the now global Bitcoin community was hit with further distressing news. Bitstamp, the 3rd largest exchange at the time confirmed that they were victim to a hack attack that resulted in the exchange losing almost 19,000 Bitcoin. Subsequently in mid Jan, the Bitcoin price had fallen close to $150.
Many mainstream media across the world released articles during this period claiming that Bitcoin had reached its “inevitable doom”. This time many within the Bitcoin community too believed that Bitcoin may never recover.
2017
The year began with Bitcoin reaching $1,000 for the first time since 2013. Bitcoin saw a growth of over 1500% through the course of the year, reaching an all-time high of $20,000 by late December. The growth is primarily attributed to the widespread attention that Bitcoin garnered as USA, UK, Canada, Germany, Switzerland, Hong Kong, Australia, Brazil, and Mexico became some of the major countries that allowed Bitcoin transactions to be conducted, albeit with certain regulations.
Japan made headlines when it gave legitimacy to virtual currencies after the government passed the Virtual Currency Act as part of a bill to amend its existing Banking Act, to account for developments in Information Technologies. The act recognised Bitcoin and Ether as legal currencies and gave cryptocurrencies in general improved global visibility.
The growth while phenomenal was certainly not as linear as it may seem. Reaching an all-time high close to $5,000 by early September 2017, Bitcoin’s steep growth seemed to come to a halt almost overnight, when it dropped by 40% to below $3,000. The drop is attributed to the central bank of China’s initial announcement that outlawed ICOs and cryptocurrency trading. This led to a ban of cryptocurrency exchanges across the country. China was previously a major market for cryptocurrency trades and the ban caused a significant drop in prices for Bitcoin and major Altcoins. The drop was short-lived as Bitcoin garnered support from major financial establishments and found itself rising back up the charts.
The current market
The most recent newsmaker is the precipitous drop that has saw Bitcoin fall by 70% from its all-time high of $20,000 in December 2017 to $6,000 in early February.
The drop is majorly attributed to the warnings issued over Bitcoin in India & South Korea. South Korea made headlines in January, as news reports began emerging about the possibility of a Bitcoin ban in the country. Over 2 Lakh citizens have since then signed a government petition to denounce the apparent ban.
On February 1st 2018, Finance Minister, Arun Jaitley presented the union budget to the parliament. He notably mentioned that the government does not consider Bitcoin as legal tender, and that measures should be taken in order to eliminate illegal activities stemming out of cryptocurrencies. To the dismay of the crypto-population in India, majority of the Indian media reinterpreted this as government’s intention to ban Bitcoin.At the time of this writing Bitcoin has already crossed $10,000 in value and shows signs of a promising recovery yet again.
The recent events are a testament to both the volatility and the resilience behind Bitcoin. It is important to notice that most of these drops have occurred due to new vulnerabilities that were discovered within the systems handling Bitcoin and not with Bitcoin itself. The mainstream media is a prime influencer of the prices and we advise everyone one of you to DYOR (Do Your Own Research) before making a decision. While Bitcoin is prone to extreme volatility that can take away half of its value overnight, most of these events are unpredictable and inevitable when it comes to dealing with a new technology. The media frenzy and the subsequent panic sells certainly does not help build a case but Bitcoin has consistently bounced-back harder than it has fallen.
So what do you think this time around? Is Bitcoin dead or will it reach a new all-time high. Do share your thoughts with us in the comments section.
Please note:- The prices mentioned reflect the “global” market prices which is primarily quoted in USD. The prices will vary dependent across countries and exchanges. Different market will have different pricing strategies depending on factors such as liquidity available, market trends, and availability of a robust cryptocurrency ecosystem.
