Bitcoin historical rallies, halvenings and bubbles

As of the time of writing, we are less than 4'000 blocks / one month away from Bitcoin's second halvening (the 4-year block reward halving period). We are also in the middle of a price rally, rising from about 400 USD/BTC and currently going through the 650 USD/BTC price. This seems like a good a time as any to talk about some of my past experiences with Bitcoin rallies, bubbles, and the last halvening.

The First Bitcoin Bubble - mid-2011

I joined the Bitcoin community during the rally for the First Bitcoin Bubble (or at least the first one everyone heard about). It is the little, insignificant blip on the chart above, but at the time it was the wild, uncharted territory. The price reached a staggering 30 USD/BTC (and as far as I remember, 40 USD/BTC equivalent on Bitomat). A lot of people, myself included, were getting into the Bitcoin mining fever, projecting to make astonishing amounts of money with their computers and GPUs. However, the bubble burst, MtGox got hacked and the future of Bitcoin was uncertain. Nothing like this has ever happened before, so we didn't know if the currency could recover from such a bubble, or was it all over. By November, bitcoins were trading for about 2.25 USD/BTC.

The 2012 Halvening

As it turns out, Bitcoin didn't die. The next year started a bit anaemic, at around 5 USD/BTC. The mining difficulty has died down after the mining fever and it looked like the price of $5 was a solid bottom where the miners would be earning about as much as they put in. The first halvening was a looming event, but we wouldn't see it until the end of that year. Early in the year I thought to myself that since $5 is a rather solid price for the miners to make a bit of money, after the halvening we should see the price be at least $10. Turns out I was right - after the event, which was rather uneventful, we did see the price in the teens. Good enough reason to go out and have a small Bitcoin party everyone seemed to have been organising for the occasion.

The Cyprus Bubble - early 2013

The early 2013 started strong - Bitcoin was growing rapidly from 25 USD/BTC to the high of over 250 USD/BTC. Some of it was driven by the starting ASIC hardware race, but I think the biggest event that contributed to the price was the Cyprus financial crisis and the bank deposit seizures / bail-ins. The bubble burst when MtGox halted its trading due to not being able to handle the market volumes. The price went down to under 60 USD/BTC as people were desperate to get rid of their BTC by any means necessary.

The China Bubble - late 2013

2013 saw not one, but two big bubbles. After Bitcoin was declared dead once more in October after Silk Road was shut down (after all, allegedly only drug traffickers use bitcoin!), Bitcoin started to show it can stand on its own and shed all of the bad press.

Around the same time Bitcoin was also heavily featured in the Money 2020 event with companies like Coinbase, BitPay and Blockchain representing (funny enough, this is what I saw at my hotel :) ).

However, despite those events being a definite boost to Bitcoin's price, it seems that the majority of the rally was done by people in China. Everyone seemed ecstatic about the price rally, posting pictures of moon landing after we reached 1000 USD/BTC, putting forward motions to switch from BTC to mBTC as a default denomination, etc. It was fun all around.

The rally ended similarly after Bitcoin was allegedly banned from Chinese banks. The price declined with some fluctuations, reaching a bottom of about 220 USD/BTC in February of 2014.

The fall of MtGox

MtGox was a mixed bag in Bitcoin's history. early on, it was the biggest exchange, they were even generous enough to bail out Bitomat after it lost its private keys. Heck, they even published an ad for Bitcoin in G8 Conference Magazine:

MtGox Bitcoin ad

However, after a few hacks and general incompetency, MtGox became a joke. Due to problems withdrawing fiat for awhile, the price on MtGox was consistently 10-15% higher than other exchanges (as everyone needed BTC to cash out). When Bitcoin withdrawals were shut down, someone set up a market for trading real BTC for MtGox BTC, since the site still allowed internal coin transfers. The price was going down below the market as the withdrawals stopped but the trading continued. Eventually, the exchange was shut down in early 2014 when Bitcoin was at its lowest since the last year's bubble.

The current situation

Currently, we seem to be in a middle of a next rally in preparation for the halvening. We started the year above 400 USD/BTC, and if the last halvening is to be believed, we should end it at at least 800 USD/BTC. However, it feels like a lot of people are rooting for a new all-time high. Well, only time will tell - Bitcoin is a honey badger, it does whatever it wants.

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