When Bitcoin was created in 2009, it had a price of zero. Since then, Bitcoin has become the best-performing asset of the decade: From 2011 to 2021, the average annual return was 230%. This is ten times higher than the NASDAQ 100, the second-best performing asset class of the decade. How did the cryptocurrency reach such great heights? Let’s take a look at the historical performance of Bitcoin to get a better understanding of where it is today.
Bitcoin from 2009 to 2015
As we mentioned, Bitcoin’s price was at $0 when it debuted in 2009. On July 17, 2010, the price of Bitcoin jumped to $0.09. In the spring of 2011, it saw a gain of 2,960% in three months, after it jumped from $1 in April to $29.60 in June. A sharp recession followed, with Bitcoin bottoming out at just about $2 in November 2011. The following year, its price rose to $13.50 in August. After an uneventful 2012, Bitcoin gained some momentum in 2013, as it reached $230 in April. In December, it spiked to $1237.55, but it fell to $687.02 just a few days later. Its price continued to drop through 2014, and by the beginning of 2015, it was at $315.21.
Bitcoin from 2016 to 2020
Over the next five years, the BTC price began to climb back slowly. By the end of 2016, it was back to $900, and through the first quarter of 2017, its price hovered around the $1,000 mark. Then, in May of 2017, the price of Bitcoin skyrocketed to $2,000. But it didn’t stop there. On December 15, 2017, it hit a new high of $19,345.49. This unprecedented boom caused investors, government institutions, and economists to notice, which led to the development of more cryptocurrencies to compete with Bitcoin. By March of 2018, there were nearly 1,700 different cryptocurrencies in circulation. Bitcoin’s price saw some small spikes for the next two years, but nothing significant. When the economy shut down due to COVID-19 in 2020, Bitcoin slowly recovered. This comeback was primarily attributed to investors’ fears surrounding the state of the global economy. By December of 2020, the BTC price was just under $20,000, a 416% increase from the start of the year.
BTC to USD Chart, 2016–2020. Graphic via Coinmarketcap
Bitcoin in 2021 to 2022
In 2021, Bitcoin kept gaining unprecedented momentum. It surpassed $40,000 in January, and by Aprile of 2021, Bitcoin hit the $60,000-mark with the price peaking on April 12th at just over $63,000. However, the cryptocurrency took another big hit in the summer of 2021, dropping to $29,795.55 on July 19th. Things began to pick up again in September, with Bitcoin reaching a little over $52,000 that month. It saw a $12,000 drop two weeks later but reached another all-time high on November 7th, 2021, when it hit $67,549.14. In December 2021, Bitcoin whimpered out, with its price dropping 19%. This was its worst year-end performance since 2013. While Bitcoin has seen a weak start in 2022, analysts predict its price will increase steadily throughout the year, possibly hitting the $100,000 mark. As of February 7th, 2022, Bitcoin sits at $44,115.00.
Highs and Lows
Since it first came on the market in 2009 at $0, the highest we’ve ever seen Bitcoin climb was slightly over $68,000 on November 9th, 2021. Its largest-ever drop was in June of 2011 when it went from $32 to one cent due to an account hack that resulted in millions of dollars of stolen Bitcoin. Bitcoin also took a massive hit in May of 2021, after Elon Musk went back on his promise to accept Bitcoin for Tesla.
Returns Based On a Single Purchase of Bitcoin
To get a better understanding of Bitcoin’s historical performance, let’s take a look at the returns based on a single purchase of Bitcoin of $100 during the highest and lowest points of 2011, 2016, and 2018. This will be calculated based on Bitcoin’s final price of 2021 at $47,743.00
- Ten-year Return: Bitcoin’s lowest price this year was $0.30. If you bought at the low the investment begins at $100 and ends at $15,914,331.67, a 15,914,232% return. Bitcoin’s highest price this year was $29.60. If you bought at the high the investment begins at $100.00 and ends at $161,293.90, a 161,194% return.
- Five-year Return: Bitcoin’s lowest price this year was $367.14. If you bought at the low the investment begins at $100 and ends at $13,004.21, a 12,904% return. Bitcoin’s highest price this year was $978.01. If you bought at the high the investment begins at $100.00 and ends at $4,881.65, a 4,782% return.
- Three-year Return: Bitcoin’s lowest price this year was $3,229.17. If you bought at the low the investment begins at $100 and ends at $1,478.49, a 1,378% return. Bitcoin’s highest price this year was $17,135.84. If you bought at the high the investment begins at $100 and ends at $278.61, a 179% return. Naturally you wouldn't be buying at the high or low. A better strategy is to dollar cost average your purchases, which would have led to the following returns (compared with the traditional gold or S&P 500 investment):
Bitcoin and Traditional assets - Return of Investment
Dollar-Cost Averaging
Despite experiencing some setbacks over the last ten years, you can’t ignore Bitcoin’s title as the best-performing asset of the decade. And despite the volatility of the coin, many investors have continued to build their holdings. Surprisingly, many of these investors haven't built their holdings by timing the market. Instead, they use a conventional dollar-cost averaging strategy. With this strategy, you invest a fixed amount of money regularly rather than buying a lump sum of stock all at once. For many Bitcoin investors, this means buying a little bit of Bitcoin every few days, weeks, or months, regardless of the price at the time. While this strategy is typically used for more traditional investments like stocks and bonds, applying it to Bitcoin helps investors avoid the psychological stress of seeing Bitcoin take a 20% hit in one day.
Bitcoin Dollar-Cost Averaging Example
Bitcoin can perform even better when using a dollar-cost averaging strategy. Let’s look at an example: Let’s say on January 1st, 2018, Michael decided to purchase $5,000 worth of Bitcoin. The price was $13,800, meaning Michael owned 0.362 BTC. On the same date, Jennifer decides she wants to put $5,000 toward Bitcoin, but instead of spending $5,000 in one day, she puts $500 toward Bitcoin every month for ten months. Due to price fluctuations, Alice owns 0.61 BTC at the end of the year, almost double what Michael holds. Dollar-cost averaging offers risk reduction and emotional detachment from your investments. In the words of billionaire investor Charlie Munger, “The real money comes not in the buying or the selling, but in the waiting.” SMART VALOR is here to help you with your investing strategy.