When the media began covering Bitcoins in April 2011, the price per Bitcoin was 75 cents. In June of that same year, the price had increased to $30 per Bitcoin.
The price then fell down to $2 per Bitcoin in November of 2011 and rose again to $5 per Bitcoin in early 2012. From January 2012 to February 2012, the price rose from about $3.50 to $7.20 per Bitcoin, before falling again in March and May.
Later in 2012, the price rose rapidly to $15.40 in August, fell down to $7.58, and then went back up to $13.50 in December. In 2013, the pattern repeated itself again, going from $13.50 to $266 then down to $50 at the pace of one month.
By summer, the price had risen back to $130. The price then rose from $130 to $1,242 later in 2013, fell down to $455, and then jumped back up to where it is now $900.
This shows that there is a pattern to Bitcoins rising and falling:
When Bitcoins get a lot of press, new Bitcoin users buy Bitcoins, which generates higher prices, which creates more coverage in the media, which brings in new users.
•The Bitcoin Bubble bursts slightly and this is usually caused by some sort of bad news in the media. Those who just got into the Bitcoin market then leave it in a panic, which causes a loop because falling prices cause selling, which pushes the price even farther down.
•At this point, all those who panicked have left the market, and with a few bumps along the road, the price again begins to move back up. Each rise and fall, it is important to note, is actually smaller than the one that preceded it.
•The Bitcoin market stabilizes and the people who own Bitcoins are the people who want to hold onto them for a longer period. With no big price changes for the media to latch onto, for good or bad, the currency’s price attention begins to fall and the Bitcoin prices stabilize in time for another boom.
The cycle repeats itself.
With each price bump, rise and fall, the bottom price of Bitcoin is higher. In 2011, the bottom price was 75 cents, in 2012 it was $3.50 and in 2013 it was $13.50. Each bit of publicity boosts the Bitcoin market, which causes this cycle but each time, everything stabilizes more and more.
What this shows is that the Bitcoin market can stabilize as time goes on. Eventually, the press coverage will decrease as Bitcoins go from being “the next big thing” to “a regular currency people use.” When that happens, the prices will stabilize and the people who want to be in the market will be staying in the market.
Of course, there is no guarantee of any of that and things could change in the future. There is really no way of knowing what will happen with Bitcoins in the coming years. Only time will tell.