Between 2011 and 2013, Bitcoin completed its first full price cycle. It rose from one dollar to over one thousand, crashing 94% along the way.
On February 9, 2011, Bitcoin hit $1.00 on Mt. Gox. It had taken sixteen months to get there. The full story of that journey is in our Bitcoin’s First Price article. What happened next was wilder than anyone expected.
The First Bubble and Crash
In early 2011, Bitcoin started attracting attention beyond its small community. Silk Road launched on the dark web in February. It gave Bitcoin its first real-world use as everyday money.
By April, Bitcoin had climbed past $2. Then media coverage hit. Gawker published an article about Silk Road in June 2011. It introduced millions of people to Bitcoin for the first time. Demand exploded.
On June 8, 2011, Bitcoin reached $31.91 on Mt. Gox. It had gone from $1 to $31 in four months. The total market was tiny. A single exchange handled almost all trading.
Then everything fell apart. On June 19, Mt. Gox suffered a security breach. An attacker accessed an administrator account and created a massive sell order. The price briefly crashed to $0.01.
Mt. Gox halted trading and rolled back the fraudulent trades. But it shook confidence in the market. Over the next five months, Bitcoin’s price dropped from $31 to around $2. That is a 94% crash.
People who had bought at the top lost nearly everything. Headlines declared Bitcoin dead. The network itself never stopped. Every ten minutes, miners added a new block to the blockchain. The protocol did not care about the price.
The Quiet Recovery
Through 2012, Bitcoin slowly rebuilt. No dramatic headlines. No media frenzy. Growth was steady, driven by a small but expanding community of users and developers.
Silk Road provided a consistent baseline of demand. It proved that Bitcoin could function as real money. By August 2012, Bitcoin had recovered to around $10.
Then came the first halving. On November 28, 2012, the block reward dropped from 50 BTC to 25 BTC. Bitcoin was trading around $12. The event passed quietly.
Most of the world had no idea it happened. For the full story of all four halvings, see The Bitcoin Halvings.
From $100 to $1,000
In early 2013, an unlikely event pushed Bitcoin into the spotlight. Cyprus faced a banking crisis. The government announced plans to tax bank deposits to fund a bailout. People with money in Cypriot banks watched their savings get frozen.
Bitcoin offered an alternative: money that no government could seize. In the weeks around the Cyprus crisis, Bitcoin’s price surged. On April 1, 2013, it crossed $100 for the first time.
Nine days later, Bitcoin hit $266. Then it crashed again, falling to around $50 within days. The pattern was familiar: rapid rise, media attention, new buyers, then a sharp correction. But Bitcoin did not return to $2 this time. The floor was higher after each cycle.
The second half of 2013 brought another wave. China’s largest exchange, BTC China, processed record trading volume. Chinese investors drove heavy demand. Bitcoin climbed steadily through the fall.
On November 27, 2013, Bitcoin crossed $1,000 on Mt. Gox. One bitcoin was now worth one thousand US dollars. Two years earlier, it had been worth one.
The celebration was short-lived. On December 5, 2013, China’s central bank banned financial institutions from handling Bitcoin transactions. By December 18, Bitcoin had fallen to around $559. For the full story, see China Bans Bitcoin (Again and Again).
The decline continued into 2014. In February, Mt. Gox collapsed entirely, revealing it had lost approximately 850,000 BTC to hackers. The exchange that had hosted Bitcoin’s rise from $1 to $1,000 was gone. Bitcoin would not see $1,000 again for nearly three years.
What the First Bull Run Proved
The 2011-2013 period established a pattern that has repeated in every cycle since. Rapid price increases bring media attention and new buyers. A crash follows.
The price settles at a higher floor than before. Then it builds again. Bitcoin went from $1 to $31, crashed to $2, recovered to $266, crashed to $50, then reached $1,000.
More importantly, Bitcoin survived everything this period threw at it. A 94% crash. A major exchange hack. A government crackdown from the world’s second-largest economy. None of it stopped the network from processing transactions.
The protocol kept running. That mattered more than any price chart.
What’s Next
To understand what gave Bitcoin its initial value, read Bitcoin’s First Price: From Zero to One Dollar. For the exchange that dominated this era, read Mt. Gox: The Hack That Changed Bitcoin Forever. For the marketplace that proved Bitcoin worked as money, read Silk Road: Bitcoin and the Dark Web.
To understand why Bitcoin continues to hold value through crashes, read Why Does Bitcoin Have Value?.