Bitcoin

17

Bitcoin is a new digital currency that is open source, distributed, and has no central issuing authority. It is not backed by anything physical, like gold, yet it has been designed so that only a fixed number of bitcoins can ever be created. Bitcoins and bitcoin transactions are protected from counterfeiting and double spending by strong cryptography. Because there is no issuing authority, there are no fees for transactions, although fees may be charged for changing into other currencies, escrow services, etc.

Like gold, bitcoin is a form of free market money: money chosen by the people who use it because it suits their needs, rather than being money because some government decrees that its subjects shall use it, and backs up that order with force if necessary (legal tender laws).

Being a very young money, bitcoin does not have a very stable value. As you can see on the logarithmic chart below, one bitcoin is now worth 100s of times what it was worth two years ago, and 10s of times what it was worth one year ago.  This is because while the number of bitcoins is growing quite slowly, the number of users, and the number of transactions using bitcoins, is growing rapidly, causing demand to outstrip supply.

Because it is a young currency, bitcoin has had various "teething" problems, and some of these have caused wild swings in value.  As the software is refined, as more vendors start accepting bitcoin, and more users choose it for their transactions, these wild swings should damp out.

Over the next 10 years or so, the number of bitcoins in circulation will approach its final total, roughly double the number in the market now. But the number of users may well go from hundreds of thousands to millions, or even hundreds of millions… which means the value of bitcoins has a lot of upside.  On the other hand, it is entirely possible that some flaw in the system may come to light, rendering bitcoins completely worthless. In any event, it is wonderful to see new forms of free market money offering choices for saving and facilitating trade.

Mt Gox weighted value of bitcoin, 2010 to present:


click on the chart to download a pdf

Same chart with a linear scale:


click on the chart to download a pdf

Closeup showing the average world price of Bitcoin on USD, CNY and EUR markets:


click on the chart to download a pdf

Comments on Bitcoin

September 12, 2012

Michael Hendricks @ 8:32 am #

Thank you for this chart. I bought my first Bitcoins almost 2 years ago. The technology has potential to become the "gold of the Internet." The two currencies share many useful attributes. I look forward to watching this chart over time.

September 28, 2012

DSW @ 11:47 am #

What's up with the log scale y axis? It makes it harder to compare to other charts since the rest use a linear scale.

February 9, 2013

Slavix @ 1:07 am #

Please create a chart with linear scales! Thanks.

February 10, 2013

Paul Sproge @ 1:34 pm #

Thank you for these charts! I find them all to be immensely valuable. I think it's great that your interest in Bitcoin shows up in these charts and in your blog.

Good stuff. Thanks for all the awesome info ;)

March 3, 2013

rizwan khan @ 12:10 pm #

Dear Sir,

Where did you get this chart from?
I tried to find a chart that went this far back, but only found one which went a few months back

And also, that seemed to suggest the price was only about $35

So where can we view the real current value of a bit coin
And, where can we get this type of historical chart?

I wouldnt mind trading bit coins, if i can chart them on my esignal.

March 9, 2013
March 24, 2013

Purple @ 9:18 pm #

Are there any precious metal dealers that accept bitcoin ?

March 25, 2013

rizwan khan @ 3:53 am #

It so high at the moment, that its hard to get in, Id like to see it come down to near $50 before buying some.

March 26, 2013

Purple @ 12:32 pm #

@editor:

Thanks! Great to know that there is an option to be able to get gold via bit coin. However, I noticed their premiums are at least double from standard premiums regarding gold. It's still not a big deal as this gives you the option to acquire gold via bit coin! Thanks again for the link. Bookmarked!

March 30, 2013

archie ND @ 3:57 am #

@editor:

Can you and would you keep that linear scale-Bitcoin vs. Gold in mg chart refreshed and up to date? So we can have a look and be surprised how the markets do its magic?

Please?!

Or kindly mail me the data behing this chart, so I could program a script that does this for me.

Kind regards, archie

September 12, 2013

More and more consumers are warming to the idea of bitcoin. One of the best things about doing business online with bitcoins is that it completely eliminates the chances of credit card fraud and identity theft. Also, with the recent spate of revelations about governments spying on people, the anonymous nature of bitcoin will appear to privacy advocates.

September 25, 2013

David @ 7:23 pm #

Is Mt Gox reliable as a source for bitcoin valuations? Apparently bitcoins are selling at a premium there because Mt Gox has legal problems that are making it difficult to get dollars out of Mt Gox accounts.

September 26, 2013
November 27, 2013

Paul Sproge @ 9:08 am #

We're reaching gold oz/bitcoin parity soon! How incredible!