Zhao Changpeng, who sold burgers at McDonald’s and worked night shifts at a gas station to support his family when he was young, would never have thought he would be on the cover of Forbes and become number three on the digital currency rich list.
‘I never speculated because I had neither time nor knowledge.’ He said, ‘When I received legal tender, all bought into Bitcoin. When I needed money, I would sell one Bitcoin. My bank account averaged only a few thousand yuan, won’t be more than 10 thousand yuan.’
The huge number of Bitcoin once accumulated brought Zhao great wealth, and the media commented on him as follows ‘it only took six months for the Chinese programmer to become very rich from founding Binance’.
Bitcoin’s history of ups and downs
In fact, not everyone in the digital currency gold rush is as lucky as Zhao. Some people got to know the new term ‘Bitcoin’ through the media at first. In order not to be an outsider, they started to buy and hold a large amount Bitcoin, dreaming of getting rich overnight and realizing the financial independence.
However, as more and more people around the world enter the market, coupled with the limited number of Bitcoins. Low liquidity and small capacity of the market has caused prices to rise and fall repeatedly.
The first boom and bust
In January 2011, the price of one Bitcoin was less than 30 cents.
Over the next few months, it broke through $1, quickly rises to $8, and then to $20. As of June 9, a single Bitcoin was worth $29.55, up about 100 times in six mouths.
Yet a crisis loom. The Mt. Gox incident changed the rise of Bitcoin. In November 2011, Bitcoin traded as low as $2, down more than 90% from its peak. At this point, believers walking in the cloud had to start thinking about ‘landing’.
The second boom and bust
During 2012, Bitcoin trading rebounded to $10 from 2$ at the end of the year. However, events that began at the end of the year (Halving production in four years, the use of integrated mining machines, Blockchain fork, Cyprus incident) have sent Bitcoin soaring again.
Bitcoin has risen more than tenfold in the two months since February 2013. But on the night of April 10, 2013, the price of Bitcoin suddenly fell from $266 to as low as $105, down more than 61% in one day and as low as 50% a week later.
That night, many people stayed up all night.
The third boom and bust
After plunging in April 2013, Bitcoin recovered after a month of correction.
On November 23, the price of Bitcoin was as high as $1,242. Since then, the figure has exceeded $1,000.
This boom had much to do with the huge contribution of Chinese investors. According to relevant data, as of November 2013, China had the world’s second-largest Bitcoin holdings and the world’s largest trading volume. However, the good times didn’t last long. On December 5, five ministries and commissions of the Central Bank issued the ‘Notice on Preventing Risks of Bitcoin’, and the price of Bitcoin fell again.
The fourth boom and bust
With the rise of blockchain technology, Bitcoin had attracted more and more attention from mainstream investment funds. In 2017, Bitcoin has become one of the most popular investment products in the market.
From $970 in early 2017 to nearly $20,000 in December, Bitcoin was up 1375% a year. However, there is nothing new under the sun. Starting in 2018, Bitcoin fell after a few days of brief rallies. As of this afternoon, the price of Bitcoin was 3398.50$.
Today, investors with large amounts of Bitcoin are like boats floating on the sea, ready to be blown by wind. So what causes Bitcoin ups and downs?
A study conducted by American Economic Research Institute (AIER) in collaboration with the university of Missouri found that ‘Prices Fluctuate When Significant or Widely Discussed Cryptocurrency News Releases Occur.’
In late September 2017, for example, the value of Bitcoin fell 30% after J.P. Morgan Chase & Co.CEO Jamie Dimon called it a fraud. They also investigated the sharp fluctuations in the value of Bitcoin prices. In the investigation, they divided news events that affected Bitcoin prices into 8 categories: BS (Bitcoin structure changes), PO (personal opinions), GR (government regulation), OC (other currencies), NI (new investment opportunities), UI (under investigation), CS (cyber security) and NF (not found).
According to the survey results, changes in the structure of Bitcoin (such as capacity expansion and bifurcation) have the largest impact on prices (12.8%). Those who seized the opportunity are always cheering for Bitcoin. People who missed out on opportunities are constantly badmouthing Bitcoin’s future.
What the future holds for Bitcoin is unclear. But it cannot be ignored that the digital currency revolution triggered by Bitcoin is affecting the future of more and more people.
