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Cryptocurrency Historical Crashes: Lessons Learned from Bitcoin Crash 2021

Bitcoin has historically been one of the most volatile asset classes, which is why every year we witness Bitcoin Crash. Bitcoin’s first price increase took place in 2010 when the value of a single Bitcoin went from around $0.0008 to $0.08. It has been through several rallies since then.

Prices for Bitcoin alternately reflect investor enthusiasm and dissatisfaction. Bitcoin’s inventor, Satoshi Nakamoto, used it as a medium for daily transactions and as a way to circumvent the traditional banking infrastructure after the 2008 financial collapse. Although cryptocurrency has not yet gained mainstream traction as a currency, it has started to gain traction as a store of value and hedge against inflation.

There may indeed be merit to this new narrative, but price fluctuations of the past have mainly been caused by unfounded bets on an ever-rising price by retail investors and traders. Recent changes in Bitcoin’s price have changed the story. Since cryptocurrency markets have matured, institutional investors are trickling in, and regulatory agencies are developing rules specific to crypto. Although Bitcoin price continues to fluctuate, it is now determined by a variety of factors within the mainstream economy, rather than by speculators looking for quick profits through momentum trades.

KEY TAKEAWAYS from Bitcoin Crash 

  • Bitcoin has had a choppy and volatile trading history since it was first introduced to the world more than a decade ago.
  • Bitcoin prices have gone through multiple bubbles in a short time.
  • Bitcoin’s evolution as an asset class has changed the factors that influence its price.
  • In recent years, Bitcoin has evolved from being a currency to a store of value to protect against inflation and uncertainty regarding the future purchasing power of the U.S. dollar.

Bitcoin Price History

During the past decade, Bitcoin investors have largely faced bumpy rides. The cryptocurrency has faced a variety of problems plaguing its ecosystem, including daily price fluctuations over double digits and fraudsters, which further aggravate its volatility. Despite all this, cryptocurrency price changes can sometimes outpace even their volatile swings, leading to massive price bubbles.

2011 Bitcoin Crash 

In 2011, the first such incident occurred. Within three months, Bitcoin’s price surged from $1 to $32, a 3200% gain. Bitcoin’s price bottomed out at $2 in November 2011 after a steep rise in 2011 and a sharp recession in 2012. By August 15, the price had increased to $13.20 from $4.80 in May the previous year.     

2013 – 2015 Bitcoin Crash

Bitcoin’s price had a decisive year in 2013. Throughout the year, the digital currency traded at $13.40 and experienced two price bubbles. As of the beginning of April 2013, the price shot up to $220. A swift increase was followed by an equally rapid fall in price, and bitcoin was changing hands at $70 by mid-April.

However, that was not the end of it. At the end of that year, there was another rally (and associated crash). Cryptocurrencies traded at $123.20 in early October. By December, it had risen to $1156.10. Three days later, it fell to around $760. This marked the start of a multi-year slump in Bitcoin’s price, which reached a low of $315 at the beginning of 2015.

2017 Price Bubble

During 2017, a fifth price bubble occurred. At the beginning of that year, the price of the cryptocurrency hovered around $1,000.A rise of more than 200% took place between March 25 and December 17 from $975.70 on March 25 to $20,089 on December 17.

Additionally, Bitcoin’s hot streak in 2017 helped place it firmly in the mainstream. Several governments and economists have taken notice of Bitcoin and begun developing their digital currencies. Even as so-called experts and investors made extreme price predictions, analysts debated the asset’s value.

2019 Volatility and Bitcoin Crash

In the following two years, Bitcoin’s price remained flat. There were signs of life between the two. In June 2019, there was a surge in price and trading volume, and the price reached $10,000, rekindling optimism that there would be another rally. However, it dropped to $7,112.73 by December of the same year.

Price hikes in 2020

In 2020, the economy shut down due to the pandemic, causing Bitcoin’s price to surge once again. At the start of the year, bitcoin was worth $7,200. Investors’ fears about the global economy were fueled by the pandemic shut down, and government policy, as a result, accelerated Bitcoin’s rise. Bitcoin traded for $18,353 at the close of business on November 23.

Although the pandemic in March crushed much of the stock market, the subsequent stimulus checks of as much as $1,200 were directly related to the decline. All stocks, including cryptocurrency, bounced from their March lows upon the release of those checks, reaching new all-time highs.

The checks added to concerns about inflation and a possible weakening of the dollar’s purchasing power. In addition to government printing of money, central banks are limiting the supply of Bitcoin so it can be viewed as a store of value. Institutional investors became interested in this narrative instead of just retail investors.

Institutional interest in cryptocurrency further boosted its price. In December 2020, Bitcoin reached just under $24,000, up 224% from its start. By January 2021, Bitcoin’s price had surpassed $40,000 for the first time in less than a month. The cryptocurrency reached a new peak of $41,528 on Jan 8, 2021. Nevertheless, it rose to $30,525.39 three days later.

2021 Bitcoin Crash

In the history of Bitcoin and other cryptocurrencies, this has been the best year ever. Bitcoin reached $40,000 in January. In February, Tesla invested $1.5 billion in bitcoin. In February, it surpassed $50,000.

Tesla car buyers can now use Bitcoin to buy a Tesla vehicle, Elon Musk tweeted in March. As a result, the prices jumped to an all-time high of $64,829.14 on April 14.

Elon Musk tweeted on May 13 that Tesla cars would not accept Bitcoin payments. Mining of the cryptocurrency caused Bitcoin to crash by nearly 50 percent due to environmental concerns.

According to the latest Bitcoin market data, the digital currency is currently worth $36,057.54.

Which Factors Influenced Early Bitcoin Trading?

There were few investors in cryptocurrency markets in Bitcoin’s early days due to thin liquidity. Due to this, there were large price swings when investors booked profits or when an adverse industry development, such as a ban on cryptocurrency exchanges, was reported. Bitcoin’s price trajectory has also been influenced by the rise and fall of cryptocurrency exchanges that held large amounts of Bitcoin.

A change in Mt. Gox’s price particularly affected the trend in Bitcoin’s price in 2014. Mt. Gox was the world’s first crypto exchange. After the exchange claimed to have lost 850,000 Bitcoins in a hack, the price fell from $850 to $580. Earlier, in December 2013, Mt. Gox had seen its price decline by 29% due to rumors of incompetent management.

Also Read: Cryptocurrency in India: Everything you need to know

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