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What is the price of Bitcoin?


As you can imagine, the price of Bitcoin is determined by different factors. As with other popular markets such as gold, oil and sugar, the price of Bitcoin is mainly defined by supply and demand. When there is more demand than supply, the price will increase. Conversely, more supply and less demand will result in the price decreasing. Relatively speaking, the cryptocurrency market is still in its early stages. Therefore, big trading activities can affect the price of Bitcoin significantly.


the current price of bitcoin

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The Bitcoin price history

In the graph below you can see that the price of Bitcoin has had a lot of fluctuations in its entire history. During its early stages, in 2009, a whole Bitcoin was worth a few dollars. In the years that followed this price has increased a lot, reaching its peak in December 2017 with a price of nearly 20,000 USD per bitcoin. Between its early stages and its peak, the average Bitcoin price has been $3,917.38. In this guide we are going to take a look at the most pivotal moments regarding the price of Bitcoin.

anycoin direct the price of bitcoin graph

1: The very first transaction

Since the introduction of Bitcoin the price has been on quite a rollercoaster. Of course it all started with the very first Bitcoin transaction. In 2009 the first transaction took place between Satoshi Nakamoto (the legendary creator of Bitcoin) and computer programmer Hal Finney. Hal Finney received 10 BTC from Satoshi Nakamoto. This whitepaper would lay down the groundwork for the financial phenomenon called cryptocurrency. Satoshi Nakamoto, who is still anonymous up till this day, has become an almost mythological figure in the world of cryptocurrency. Due to Satoshi being incognito, the price of bitcoin can not drop due to the owner’s personal affiliations and/or personal behavior.

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Who is Satoshi?

2: The first commercial transaction

The first commercial transaction took place by Laszlo Hanyecz, an American software developer, in 2010. On the 22th of May 2010, Laszlo Hanyecz bought two pizzas for 10,000 BTC. If we convert those 10.000 btc’s to euro’s we would receive (during the writing of this article) the hefty sum of approximately €89.140.000. The key takeaway (no pun intended) here is not the insane sum he would have received today, but the fact that Laszlo made an important first step for Bitcoin as a way of payment.

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One pizza? That will be 10.000 bitcoins please!

3: The breakthrough year

Over time, Bitcoin got more and more publicity. Transitioning from an incredibly nerdy niche to a technological phenomenon. Retailers started using Bitcoin, magazines started getting interested in blockchain technology and the first cryptocurrency brokers were starting to pop up (with of course Anycoin Direct in 2013). The year 2013, can be dubbed as the breakthrough year of the coin. At the start of 2013, the price of one Bitcoin was $22. At the end of 2013, Bitcoin was worth $1,000 USD.

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2013 was an important year for BTC

4: Bankruptcy Mt. Gox

Unfortunately, the Bitcoin price was hit hard by the bankruptcy of Mt. Gox in 2014. Mt. Gox was the biggest Bitcoin exchange during that time. So what happened? The exchange, originally known for Magic the Gathering cards, got hacked and approximately 850,000 bitcoins got stolen. You can imagine that the impact of this event was enormous. This event triggered a wave of hacks that targeted cryptocurrency exchanges. Subsequently, the confidence in cryptocurrencies decreased, causing the price of Bitcoin to decrease as well. Following these events, the price of Bitcoin dropped 32% between the 4th of February and the 16th of February. As a result, the price was drawn back to a value of $300 in January 2015. It took some time for Bitcoin to recover.

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In 2014 7% of all bitcoins got stolen

5: All time high price

In 2017, Bitcoin reached its (at that time) all-time high. At the beginning of 2017, Bitcoin was worth $1,000. A milestone for the crypto world. More retailers started to accept Bitcoin as a way of payment, giving Bitcoin more attention. This was the start of an insanely eventful year. Not only Bitcoin was ready for a rocket fueled launch, the entire crypto market was harvesting enormous amounts of attention. Once the ball started rolling, there was no stopping it. More people wanted in on the ‘hype-train’, resulting in a growing demand. Bitcoin’s rise started getting the on 8'o clock news. Bitcoin was becoming mainstream. The result? A staggering all time high of €20.000 USD.

6: After 2017

After that enormous amount of mainstream interest, the hype became to big. After the price began to dip, people got scared. A snowball effect was created and the price dropped dramatically. In November 2018, the price had dropped from $20.000 to $4.000 and the interest subdued due to so many people making significant losses. It took some time, but in the summer of 2019 the price had crawled back to $10.000. March 2020, on the other hand so another big dip tanking the price to $5.000. You can start to see why Bitcoin has been called ‘extremely volatile’ on numerous occasions. During the autumn of 2020, a resurge had begun pushing the price to $17.000, nearing that all time high of 20k.

7: The 2020 ATH

After two relatively calm years, the entire crypto market had a resurgence and it all started (once again) with Bitcoin. In the month of November, the number one climbed and climbed from 14k to 20k. After two years of calm, one exciting November month broke the old 2017 record. A new ATH was set. The months December and the beginning of 2021 were nothing short of amazing for the Bitcoin (and crypto) community. 25k, 30k, 35k, 40k, record after record got broken and the new year has only just begun.

How is the Bitcoin Price influenced?

Different factors influence the value of Bitcoin. Earlier we already mentioned the influence of the media on the price of Bitcoins. The best example of this is ,of course, the rapid growth of the Bitcoin price in 2017. Contrarily, negative media attention can cause a price drop. In the next paragraphs, we will discuss some other factors which can influence the price of Bitcoin.

Supply and Demand

As with any other products in economics, demand affects the price of Bitcoin. As Bitcoin becomes more popular, more people want to invest in it. This leads to an increase in demand, while its supply remains equal. These events will make people more willing to pay a higher amount for the same bitcoin, causing the price to rise. On the other hand, when the demand goes down more people will be trying to sell. Therefore there will be an increased supply, which results in a decrease in price.

Furthermore, an important characteristic Bitcoin has over traditional currencies, is that there is a finite supply of bitcoins that exist. There is a maximum amount of 21 million Bitcoins. When the number of 21 million bitcoins is reached, miners can no longer create (mine) new bitcoins. Looking back at previous years we can see that each year fewer Bitcoins are released. When fewer bitcoins are released and the demand in the currency itself increases, the price will go up.

anycoin direct the price of bitcoin graph

Competitors

As with any other products in economics, demand affects the price of Bitcoin. As Bitcoin becomes more popular, more people want to invest in it. This leads to an increase in demand, while its supply remains equal. These events will make people more willing to pay a higher amount for the same bitcoin, causing the price to rise. On the other hand, when the demand goes down more people will be trying to sell. Therefore there will be an increased supply, which results in a decrease in price.

Besides Bitcoin, there are plenty of other cryptocurrencies. Although Bitcoin is the market leader in the cryptocurrency market (by a long shot), they faced increasingly more competition from other cryptocurrencies as the years progressed. For example, Ethereum, Ripple, Litecoin, and EOS made the stage. In addition, stablecoins like Tether have made quite an impact on the market. Let’s compare the price development of these different currencies in correlation with Bitcoin. The main takeway is that the prices of the other coins seem to tethered to the value of Bitcoin. In other words, when we see an increase in the price of Bitcoins, there’s a high chance that the other cryptocurrencies will follow that same pattern. This means that investors in the cryptocurrency market not solely invest in Bitcoin, essentially (slightly) lowering the demand for Bitcoins. As stated earlier, the higher the demand the higher the price will be. Due to investments being divided over the market, the increase of the Bitcoin price will stay lower.


Bitcoin

BTC

Ethereum

ETH

Ripple

XRP

Litecoin

LTC


Cost of production

Another factor that influences the price of any product is the cost of production. Since cryptocurrencies are virtual, the production of Bitcoin are done via mining. Summarized: Bitcoin mining is a difficult procedure of solving cryptographic math problems. Miners are competing to solve these cryptographic math problems. The more miners are joining the competition the more difficult the problem will be, making it more expensive as there is more competition. This results in an increasing hash rate of the blockchain. The hash rate is the number of calculations per second a miner can perform to solve a mathematical sum. This hash rate, increases the change of adding a block and increases the mining cost. Therefore, the mining process also influences the value of Bitcoin.

Regulations

The increasing popularity of cryptocurrencies has caused the government to keep an eye on the activities in the industry. Regulation can affect the price of Bitcoin in different ways. Firstly, regulation by the government can lead to a price drop. Contrarily, regulation helps by the acceptance of bitcoin. For instance, it could help motivating big investors to enter the market which reduces volatility in the future.

The future of the Bitcoin price

It is unpredictable what the price of Bitcoin will do in the future. Unfortunately, we can’t say what the price of Bitcoin will be on a specific day in the future. However, a common model that is used to partially predict the price of Bitcoin is Stock to Flow ratio (S2F). This model can be divided into two parts. The first part of the model is stock, which is defined by the inventory of a company. The second part of the model is the flow, which means the annual supply of a company. The S2F ratio is calculated by dividing a company’s inventory by its annual supply. Below you can find the equitation of the S2F ratio.

It is unpredictable what the price of Bitcoin will do in the future. Unfortunately, we can’t say what the price of Bitcoin will be on a specific day in the future. However, a common model that is used to partially predict the price of Bitcoin is Stock to Flow ratio (S2F). This model can be divided into two parts. The first part of the model is stock, which is defined by the inventory of a company. The second part of the model is the flow, which means the annual supply of a company. The S2F ratio is calculated by dividing a company’s inventory by its annual supply. Below you can find the equitation of the S2F ratio.

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A higher output means that it is more attractive for investors to invest in Bitcoin. The output tells us something about the scarcity of Bitcoin. Furthermore, it also tells us something about how many years it takes to double the inventory. Every four years the reward that miners receive for adding new transactions to the blockchain will be halved. This halving influences the price of Bitcoin as well as the S2F.

It is unclear what the future holds. One thing, however, is certain. Namely, that the market is still in it’s early stages. New investors, innovations, regulations, it will be interesting to see what the future holds for our favorite hobby.