The origins of Bitcoin: Markets and crashes

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This series looks back on the history of Bitcoin. Read parts one, two, three, four and five.

As Bitcoin continued to gain recognition since the first block of the cryptocurrency was established in 2009, it saw its ups and downs, just like any new innovation. Looking back at what automobile owners had to do when cars were first rolled out and it becomes evident that any industry now taken for granted has had to deal with a huge learning curve. Crypto has been no different, facing challenges and obstacles that are inherent to the growth and maturity of any product or service. In 2013, these hurdles became more pronounced.

In February of that year, Bitcoin Client v0.8 was released, designed to provide better download speed. That same month, the Mt. Gox crypto exchange, which would go bust the following year, saw trading of above $31.91 for the first time. That price had been achieved two years earlier, making the new high the best that had been seen in 601 days.

The following month, a protocol rule that had gone undetected led to a hard fork of Bitcoin. A miner who was running version 0.8 created a large block that wasn’t compatible with earlier versions, and the split resulted. Any miner, user or merchant who was running the new version began working on that fork, while older versions rejected the blocks and created their own. The result was to have 0.8 clients revert to 0.7 in order to create one chain that would be compatible with all software versions in use.

This was also when the Financial Crimes Enforcement Network (FinCEN) addressed crypto, stating that there weren’t any issues with its use, per se, but added that existing financial regulations would have to be considered when exchanging dollars for Bitcoin. Since then, FinCEN has taken a more stringent approach and is looking to regulate virtually any transaction related to crypto.

Also in March of 2013, Bitcoin’s market cap surpassed $1 billion for the first time, on the 28th of that month. This was a huge step forward and it only took a few days for the digital currency’s price to reach more than $100. It would increase over the next nine months, ultimately reaching $1,163 in November.

However, things fell apart soon after the massive price point was reached. In December, China’s government released a statement essentially calling crypto nothing more than a game and not a real currency, leading to a major crash that would last until 2015 when the price hit bottom at $152.40 in January of that year.