http://www.forbes.com/sites/timothylee/2013/04/11/an-illustrated-history-of-bitcoin-crashes/?utm_campaign=techtwittersf&utm_source=twitter&utm_medium=socialAn Illustrated History Of Bitcoin CrashesWednesday saw one of the largest declines in Bitcoin prices in the cryptocurrency’s lifetime. Many commentators declared the fall the beginning of the end for Bitcoin. I’m not sure if that’s correct or not, but in any event a sense of perspective is always helpful. So here are the biggest Bitcoin crashes since I started paying attention to the currency in early 2011.
June 8-12, 2011Peak price: $32Price decline: 68 percentThis was the peak of the great Bitcoin bubble of 2011. Prices rebounded somewhat after this initial plunge, but there followed a long bear market that bottomed out at $2 in November 2011, a total decline of 94 percent. Prices wouldn’t return to this peak again until 2013.
January 17, 2012Peak price: $7.20Price decline: 36 percentAfter prices fell to $2 in the fall of 2011, Bitcoin prices began to recover. They ended the year at $4.50, and rose to $7.20 in early January. Then on January 16 and 17 prices plunged, briefly falling to $4.60 before settling around $6.25. Bitcoin prices would not regain their previous highs for another six months.
August 17-19, 2012Peak price: $15.25Price decline: 51 percentBitcoin prices more than doubled between July 1 and August 18, 2012. Then in a matter of minutes, the price of Bitcoins fell from $15.25 to $10.50. The decline continued over the next two days, reaching a low of about $7.50. The price didn’t rise above $15 again until the new year.
March 6 and 11, 2013Peak price: $49Price decline: 33 percentEarly 2013 saw an extraordinary Bitcoin boom. By the beginning of March, Bitcoin prices were already double the 2012 high, and they rose another 50 percent over the next week. Then on March 6, the price collapsed, briefly falling to $34 before rising again to $45.
A few days later, it happened again. A bug in the Bitcoin software on March 11 caused the price to fall from $48 to $36.50 in a matter of minutes. Once it became clear that the situation was under control, the currency rebounded to near its previous highs.
These two crashes didn’t have any noticeable impact on Bitcoin’s upward price trajectory. Bitcoin prices would reach $60 on March 19 and end the month above $90.
April 10, 2013Peak price: $266Price decline: 61 percentLike last month’s crash, Wednesday’s decline left the currency’s value where it started out the month. Obviously, it was a very painful experience if you bought bitcoins in the last couple of days, but anyone who bought bitcoins at last week’s price of $140 is still significantly ahead. And people who bought at any time before this month have made a significant profit.
Of course, that assumes that prices don’t decline further in the coming days. It’s possible that today’s crash will inaugurate a bear market like the one that occurred in late 2011. It took almost 2 years for Bitcoin prices to recover from those declines. Perhaps we won’t see Bitcoins worth $260 again until 2015. Or ever.
But ultimately I think that underscores the point I made on Wednesday morning around the time the crash was beginning. The claim that Wednesday morning’s prices were a bubble is ultimately a prediction about the long-term value of the currency. If bitcoins are worth $500 in 2018, we’ll look back at Wednesday’s sell-off as a freak event that (like the other crashes that came before it) temporarily halted the rise toward the currency’s real value. Conversely, if a bitcoin has fallen to $5 five years from now, we’ll shake our heads at the irrational exuberance that once valued a bitcoin at $260 (or $32, for that matter). But right now, it’s simply too early to tell.
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