Blockchain

stack of nine golden bitcoins
Dmitry Kalinovsky / Shutterstock

Since its inception, bitcoin has become one of the most valuable and volatile assets in the market — although it's plunged in 2022, it peaked at more than US$68,000 in 2021.

In just over a decade, bitcoin has grown a cult-like following and surged to impressive heights. Now the digital asset of choice, bitcoin’s meteoric rise is unlike any other commodity, resource or asset.

Bitcoin has paved the way for the growing cryptocurrency asset class, surging to an all-time high of US$68,649.05 on November 10, 2021. Benefiting from excess cash in the market and investor interest, bitcoin rose more than 1,200 percent between March 2020 and November 2021. However, its bullish ascent came to a crashing end in 2022 as investors became more risk averse amid broad inflation and economic uncertainty.

What spurred bitcoin's price rise and where is it now? Read on to find out.


What is bitcoin?

Created to counter the 2008 financial crisis, bitcoin 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) who used the pseudonym 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 chart in US dollars, 2011 to 2022.

Chart via TradingEconomics.

In July 2010, bitcoin began trading at US$0.0008, climbing to US$0.08 by month’s end. The cryptocurrency then performed relatively flatly, slowly rising into the US$10 range until it spiked to US$250 in April 2013.

How many bitcoins are there?

Unlike traditional currencies that can increase circulation through printing, bitcoin is finite. There are 21 million in existence, of which 19,144,112 are in circulation, leaving just under 2 million to be mined.

This limit is a core function of bitcoin's algorithm, and was designed to offset inflation by maintaining scarcity.

A new bitcoin is created when a bitcoin miner uses highly specialized software to complete a block of transaction verifications on the bitcoin blockchain. Roughly 900 bitcoins are currently mined per day; however, after 210,000 blocks are completed, the bitcoin protocol automatically reduces the number of new coins issued by half.

Halvings have occurred every four years since 2012, with the most recent happening in May 2020.

Halving not only counteracts inflation, but also supports the cryptocurrency’s value by ensuring that its price will increase if demand remains the same.

At the moment, miners are paid 6.25 bitcoin (US$119,141.87) for every block they complete.

How did COVID-19 affect the bitcoin price?

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. 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 still held above US$3,190, a low it has not hit again since that time.

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 metal 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.

What was the highest price for bitcoin?

Bitcoin’s ascent continued in 2021, rallying to an all-time high of US$68,649.05 in November, a 98.82 percent increase from January’s value. By the end of the year, the digital asset had shed some of its value, ending the 12 month period at US$47,897.16 — still a 62 percent year-over-year increase.

Much of the growth in 2021 was attributed to investor risk-on appetite, as well as Tesla’s (NASDAQ:TSLA) announcement that it had purchased US$1.5 billion in bitcoin. Activity was further compounded when Tesla reported plans to begin accepting bitcoin as payment for its electric vehicles. Following some criticism from investors and environmentalists, the electric car maker is currently conducting its due diligence on the amount of renewable energy used to mine the cryptocurrency before allowing customers to buy cars with it.

Increased money printing in response to the pandemic has also benefited bitcoin, as investors with more capital looked to diversify their portfolios. The success of the world’s first crypto amid the market ups and downs of 2020 and 2021 led to more interest and investment in other cryptocurrencies and digital assets.

2021 also saw the rise of the non-fungible token (NFT). Utilizing blockchain technology, NFTs are data units that are stored, sold and traded digitally. These unique crypto assets are widely used for art and other digital mediums.

It is estimated that the NFT market grew to more than US$40 billion in 2021, driven exclusively by cryptocurrencies, the only form of payment for NFTs.

Bitcoin’s mainstream acceptance may be a continued price catalyst as more businesses accept the digital token as payment; the growing market for digital assets, as well as the burgeoning Metaverse, could all aid in the momentum of the cryptocurrency space.

What is bitcoin at today?

While notoriety has catapulted the first digital currency to all-time highs, the primary headwind for the crypto coin is its frequent volatility, which was on full display in early 2022, when prices fell by more than 50 percent.

Market uncertainty continued to weigh heavily on the world’s first exclusively digital currency during the second quarter of 2022, sending values below US$20,000 for the first time since December 2020.

Prices for bitcoin continued to decline through the beginning of September to remain rangebound at US$19,000. Despite this significant price drop, bitcoin's powerful performance and future potential cannot be understated. Gold, the closest comparable asset to cryptocurrencies, has risen just 627 percent over the last 100 years, from US$283 in January 1921 to US$2,060 in August 2020.

This is an updated version of an article first published by the Investing News Network in 2021.

Don’t forget to follow us @INN_Technology for real-time updates!

Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Bitcoin vs. Gold:

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