In 2013, a friend and I were convinced by a tech-savvy acquaintance to invest in something called Litecoin — basically, Bitcoin’s less expensive little sister. We put $100 each into a random exchange, which at the time got us about 60 litecoins total, give or take, and forgot about them.
Over the years we’d talked about getting them out, but we never did. And then over the summer the federal government shut down the exchange over its ties to money laundering.
As Bitcoin’s price went on a wild roller coaster ride in recent months, we joked about getting back in. But our cryptocurrency speculation days are probably over — we’re not as eager to pay thousands of dollars for internet money that no one except for a select few seems to understand.
The thing about Bitcoin — the thing about currency, broadly — is that its value depends entirely on what people are willing to pay for it. And right now, people are willing to pay a lot for Bitcoin, with varying degrees of enthusiasm. Its price climbed more than 1,000 percent in 2017, starting the year at about $1,000 and in mid-December nearly grazing $20,000. It ended the year around $13,000.
But there’s no clear explanation for why there’s this sudden spike in interest, and even many Bitcoin true believers are wary of what’s going on. Bitcoin is notoriously volatile and has seen multiple booms and crashes. In April 2013, it lost more than half of its value overnight. In 2014 when one of its major exchanges lost $400 million, Bitcoin’s price fell by half again.
And the volatility hasn’t settled. Last summer, Bitcoin dropped by 40 percent on concerns over a clampdown in China. It had multiple price corrections of more than 25 percent in 2017. For some perspective, Black Tuesday, the Wall Street crash that precipitated the Great Depression, saw stocks fall 12 percent in a single day.
Bitcoin’s volatility is, in part, what has drawn investors, speculators, and, increasingly, regulators. The price of Bitcoin surpassed $10,000 for the first time in late November and has neared, though not surpassed, $20,000. But the ride hasn’t been a smooth one. For example, it topped $17,000 for the first time on December 8 and by December 10 was back in the $13,000 range. On December 19, its price fell by 10 percent in a matter of minutes when a popular US-based exchange began trading bitcoin cash, a spinoff of the original Bitcoin.
“It’s insane,” said Brayton Williams, the co-founder of Boost VC, a California-based accelerator that invests heavily in Bitcoin and blockchain, the ledger technology upon which Bitcoin is based. “For us, we have this weird dilemma where we’ve been fighting this battle for the last four and a half years, and now it’s like, did we win?”
Bitcoin appears to be in bubble territory — not only because of its price runup but also given the speculation, volatility, and new players in the space.
But the wild ride might be worth it. Bitcoin believers say it could be the future of money — but even if it isn’t, it’s quite a world all on its own. Bitcoin has hit the mainstream in recent months after garnering more attention in the media, on Main Street, and on Wall Street, and has taught investors a lesson in its potential as well as its pitfalls. It’s very possibly in bubble territory, but that might not diminish its eventual impact on finance and technology.