11 years ago bitcoin was worth almost zero, what happened?

Today, June 11, 2022, eleven years have passed since the first big rise in bitcoin (BTC) that caused its price to increase 3,400% in four months. This strong rally ended with a terrible crash, worse than the one the market is currently experiencing, from which it managed to recover years later.

In January 2011, BTC was worth just $0.3. However, this did not last long, as due to the strength of demand, its price rose to USD 1 in February. From there, its value fell a little until the beginning of April when began its first rally that led it to trade at USD 35 on June 11 of that year, its historical maximum until that moment.

In this way, it achieved an increase of more than 11,500% in 2011, which allowed buyers to enrich themselves from growth. Although after the rise, it depreciated 93% in five months until November of that year when it hit the low of USD 2, thus losing almost all of the rally it had achieved.

A man who sold bitcoin in early 2011 when it was worth $0.3 showed his regret in May 2011, even after falling from its peak, seeing that BTC had hit $8. Source: Twitter.

Such a moment is remembered today as the first bitcoin bubble.. This term is used to identify a strong increase in the price of an asset, which is then preceded by a violent capitulation among traders that generates a price crash.

Bubbles are basically caused by an exponential increase in demand in a short period of time. That is, due to much speculation, periods through which the cryptocurrency has passed on several occasions.

Bitcoin price in 2011.
Bitcoin’s first big spike was in 2011 with an increase of more than 11,500% for the year after going from $0.3 to $28-35, ending with a harsh 93% decline. Source: buybitcoinworldwide.com.

Bitcoin took two years to recover from the collapse of its first bubble

Only in 2013, two years after its first big rise, did it manage to recover its value to 35 dollars and even surpass it, reaching a maximum of 220 dollars. An event that followed another sharp price crash and…guess what happened next?

Yes, another rally and another crash! This cycle has been repeated several times since then, as fans of the cryptocurrency know. From this perspective, it seems that we are currently living the bad drink of this repetitive history of bitcoin.

These low moments are known as price corrections, where the market seeks to consolidate a real and fair value for the asset. As of this writing, BTC is trading at $30,000, down 58% from its all-time high seven months ago at $67,800, according to the CriptoNoticias calculator.

What caused the first big bitcoin bubble?

It is difficult to identify a single element that produces so much sudden demand for BTC every so often, driving its price up abysmally. But it should be noted that there are some factors that are distinguishable. And if you’re wondering what prompted its first big spike, know that the answer isn’t all that politically correct.

According to reports of the time, it is estimated that The first bitcoin bubble occurred in 2011 due to the strong purchase of the cryptocurrency to pay for illegal drugs in the United States.. Precisely thanks to the anonymity that allows having and transferring BTC, especially at that time when transaction monitoring was not as well known and cryptocurrency was not regulated.

The reason why this is believed is because the rise of BTC coincides with the high number of visits that a controversial article published in January of that year by Adrian Chen got. This taught how to buy drugs with bitcoin in an illegal online store, called Silk Road, as easily as if it were ordering food at home.

It is estimated that the article was viewed more than 1.5 million times, gaining great popularity among teenagers in the United States. An example of the interest it had generated was the reaction of Senators Joe Manchin of West Virginia and Chuck Schumer of New York, who demanded the closure of the store after learning of it.

But as always happens, that was not all that generated the strong rise of bitcoin at that time, but a confluence of factors. And, although it is impossible to know the reason for each person’s purchase, it can be estimated that its appearance for the first time in the big media also motivated the formation of the first BTC bubble.

According to specialist Alex Preukschat, an article in Time magazine published on April 16, 2011 allowed cryptocurrency to become known to the general public for the first time. In this way, he highlights that this was enough for its price to double in a week, going from USD 0.8 to USD 1.60. And it didn’t stop there.

Its rise continued, as we mentioned before, until it hit a high of $35 on June 11. Although, due to the lack of records at the time, some media maintain that the peak was a little lower, around USD 28 three days earlier, on June 8.

Current major explorers such as TradingView, CoinGecko or MarketCap do not have BTC trading history in 2011. They started recording its price fluctuations some time later when bitcoin got higher value and interest among investors and followers of its fundamentals.

Scammers caused the sharp fall of the first bitcoin bubble

Now that you know what caused bitcoin’s first rally, the big question is what caused it to drop after hitting a high of $35 in June. Well, the answer derives from a sum of unfortunate situations for the cryptocurrency with malicious actors involved, as reported by the specialist Preukschat.

The price of bitcoin was affected in June 2011, after a hack suffered by one of the most popular exchanges of the moment, Mt Gox. The attack caused a copy of the database of thousands of platform users to circulate on the internet, with their names, emails and passwords.

The situation created a massive bitcoin selloff that caused its price to plummet to $17 in a matter of minutes and even at $13 on other exchanges. And as if that were not enough, the following month, in July, another event generated distrust in the market, prompting investors to continue dumping the cryptocurrency.

What happened was that in July the MyBitcoin platform disappeared with 51% of its clients’ bitcoins, supposedly due to a hack. He only managed to return the rest of the BTC he had to their respective owners, arguing that they were the only ones he had in a cold wallet, one of the most secure wallets out there, since it is outside the network.

The Bitomat exchange was added to this scenario, which in July lost 17,000 bitcoins due to a technical error. Although their users did not lose their funds, as Mt Gox managed to buy the funds and kept their customer base. In this way, it reinforced its position as the cryptocurrency trading platform with the highest volume at that time.

The sum of these events led to a wave of bitcoin sales that lasted until November 2011 when it hit its low at USD 2. So too they were among the first unfortunate events that showed the importance of storing bitcoin in a self-custody wallet outside of exchanges.

11 years into the bitcoin rollercoaster ride, enthusiasts remain bullish

Since 2011, bitcoin has been on a rollercoaster of rock-bottom lows and higher highs. The current drop of 58% seems even small compared to that of that time, which was 94%. However, this does not reassure investors that. according to him index of Fear & Greed, they are in extreme fear today, something that also happened at that time.

Proof of this is the opinion of businessman Nick Allen who in October 2011 said on Twitter that he was grateful not to have bought BTC seeing that it had fallen to USD 2. A message that has now gone viral, given how much its price has risen since so, which reinforces the conviction of the bulls at times of sharp declines.

After seeing bitcoin drop to $2 in 2011, this user showed how grateful he was that he hadn’t bought. Font: Twitter.

That is why, despite the fear of the market, enthusiasts hope that this cycle will repeat itself soon. As has happened on several occasions, they project that the price of BTC will retrace the current downward trend at some point achieving another all-time high that would allow them to get rich.

Currently, most of the people who bought the cryptocurrency in 2022 or 2021 find themselves in unrealized losses. “Unrealized” since, far from selling at a loss, those with bullish conviction hold onto their bitcoins for the long term. The reason is that they believe adoption will grow, driving their value up even more. Same message that made some in 2011 not sell their bitcoins and store them until today.

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