A larger perspective on Bitcoin & its crashes 🔍
That bitcoin is an extremely volatile asset is something you often get brutally reminded of when you wake up in the morning, unknowingly check your phone and the price suddenly is down -35% from when you went to bed. When that happens your first impulse can often be to throw yourself onto Coinbase and sell it all, which you in most cases will have to regret a day later when the market out of nowhere recovers and are back at an all-time high.
Therefore I would now like to give you newcomers that now maybe just experienced your first bitcoin crash a bit bigger perspective on the whole thing. Because crashes is a recurring event in Bitcoins 9 year long history and something a HODL:er get used to pretty damn quickly.
The China-Crash of 2017 🇨🇳
Let’s begin by looking at one of the most recent crashes we’ve seen which took place right before this fall’s massive price-increase. Bitcoin had just gone through its largest fork when Bitcoin Cash was created. This surprisingly led to an increase in price to around $5000 per bitcoin at the beginning of September. But when Chinas government then went out swinging hard against so-called ICO:s, (read about them here), rumors quickly started spreading that cryptocurrencies were being banned altogether. This made the bitcoin price a whole 37%.
Summer-sale of 2017 🏖
The big summer-sale of 2017 on cryptocurrencies came after a steady rise in bitcoins price to levels that hadn’t been seen in years. After peaking around $3000 in the middle of July the worry of the upcoming fork led to a fall of 36% down again to $1800. However, the recovery was swift as soon as the fork was completed.
The 2013 bubble 🎈
After spending the majority of the year of 2013 around $120 the price went flying up 1000% to a value at $1150 per bitcoin at the end of November. The reason behind this massive price-increase is considered to be a classic bubble-scenario where new investors throw in money which caused the prices to increase even more, attracting additional investors and the fact that governments and regulators opened their stance and looked at bitcoin in a more positive way put fuel on the fire so to speak. In the middle of December, the price had crashed back down $600 again.
Mt.Gox crash 2014 📉
After the crash of 2013, the price slowly but surely made its way back up to around $800 in February when it was time for the next trip downwards. The reason behind the crash this time was that one of the largest exchanges for bitcoin, Mt. Gox, went out and said that they had been hacked and lost 850,000 of their user’s bitcoins. This eventually led to the exchange closing its doors never to be opened up again. The effects on the market were enormous and the price plummeted a whole 49% and made bitcoins price growth to really cool off the next coming years. This mainly due to the lack of trust in the exchanges was surely at the bottom amongst the users.
Crashes are an inevitable growing pain on Bitcoins journey upwards and will keep on happenings as long as we are at this early stage and cryptocurrencies still is a relatively small market. Historically, however, the market always recovers after a crash so the people who can sit calmly through the downs, as well as the ups, will probably alright next time it happens as well. #HODL