The price surge, which is so dramatic that it is best viewed on logarithmic charts, has been punctuated by three deep bear markets: dropping 93% in 2010 and 2011, 83% in 2013 and 2014, and 82% in 2018 and 2019. In 2021, bitcoin has retreated about 50% from its highs.
Bitcoin’s latest bear market began at the end of April when prices peaked at around $64,000 per coin.
Each one of these bear markets came after a spike in bitcoin’s “cost per transaction.” Cost per transaction spiked late last year, according to blockchain.info, rising 10-fold from about $25 per transaction to $250 or more before this year’s correction.
2) Transactions per day: The relationship between trading volumes and bitcoin prices isn’t always clear, but since 2013 a rising number of transactions sometimes seemed to presage rising bitcoin prices, whereas stagnating or falling volumes sometimes appeared ahead of declines in prices.
This means that with 18.7 million bitcoins in existence, producing the remaining 2.3 million coins will be computationally intensive and expensive.
What happens with bitcoin has implications for the wider crypto asset universe, including ether, the currency of the Ethereum smart contract network.
By contrast, there is no limit to the total number of ether coins that can be created, but only 18 million ether can be created in any 12-month period.
When ether prices rise relative to bitcoin, as they did in 2017 and as they have recently, this appears to incentivize the creation of additional ether coins relative to the pre-ordained number of new bitcoin being created.
This suggests that bitcoin retains a substantial first mover, incumbency advantage in the crypto currency world despite the fact that ether, as the currency of the Ethereum smart contract network, may have more practical applications than bitcoin, which is mainly used as a store of value.