It is no stretch to say that the Bitcoin price set the standards for every other cryptocurrency on the market. As evidence of its lasting effect, it has held the uncontested title for most valuable cryptocurrency by market capitalization, always accounting for at least one-third of the entire crypto market. This measure has come to be known as “Bitcoin dominance.”
Bitcoin was designed to solve some of the issues of traditional finance and fiat currencies. Most notably, it introduced the concept of a fixed supply for a currency, leading some to compare Bitcoin more to limited resources like gold rather than to dollars or euros.
The maximum supply of Bitcoin is 21 million BTC. As new BTC are mined and enter the market and halving events slow down the rate at which BTC are produced, the circulating supply approaches this limit—making BTC a deflationary asset. Further, millions of BTC (estimated at around 3.7 million in 2020) are likely forever lost due to people losing their private keys. This further reduces the true maximum supply, potentially making the remaining BTC more valuable.
Bitcoin (BTC) Price Charts
Bitcoin’s price has been much more volatile than other traditional assets, like equities and commodities, and many consider it to be a more speculative asset.
Though many investors are long-term BTC holders (also known as “hodlers”) and believe in its long-term appreciation, many BTC traders attempt to use short- and medium-term indicators to predict price fluctuations and make a profit. Some typical trends in technical analysis have indeed played out, including both the “double top” in BTC’s price and the “bearish divergence” of BTC’s price/relative strength index (RSI) in April and November 2021.
Double Top
Bearish Divergence
Bitcoin (BTC) Price and its History
Bitcoin has experienced more bull and bear markets than any other cryptocurrency, and the most impressive increases in BTC’s valuation have followed halvings. The halving event is programmed into Bitcoin’s code and decreases (by half) the number of new bitcoins issued every block. These events occur every 210,000 blocks (roughly every four years) since Bitcoin’s inception and will continue happening until all bitcoins are mined. Since the amount of released BTC decreases, and the demand has historically stayed stable or increased, BTC’s price has risen accordingly in the following months/years.
Beyond Bitcoin's internal design, external factors also significantly impact its BTC’s price. For instance, BTC’s correlation to the stock market has grown over time. Additionally, the rise of asset prices during the highly inflationary pandemic period of 2021 correlated with a large rise in BTC’s price. Further, through 2022 and 2023, traditional financial institutions' growing interest in Bitcoin (including a few adding BTC to their balance sheets) culminated in the approval of the U.S.’s first spot Bitcoin ETFs in January 2024.
Although there are many examples of events that resulted in rising valuations, certain “black swan” events such as the collapse of Mt. Gox (2014) and the initial shock of the COVID pandemic (2020) have caused large crashes in BTC’s price.
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Conclusion
Bitcoin (BTC) is the oldest, widely accepted cryptocurrency on the market. It introduced the concept of a fixed maximum supply, making it a deflationary asset.
The price of BTC has been subject to many forces, some innate (like Bitcoin’s halvings) and others external (like global macroeconomic factors and the approval of BTC-associated financial tools).