Guide to the Bitcoin Exchange Rate

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The History of Bitcoin Exchange Rates: Highs and Lows

Bitcoin is well known for its ability to rapidly rise and fall in value. Due to the dynamic, decentralised nature of the cryptocurrency, it is possible for the price to significantly shift in a few hours.

This can make buying and trading Bitcoin a lucrative, but extremely risky investment. There have been multiple occasions since Bitcoin’s creation that have seen the value of the coin shift dramatically.

Here at Forexbonus.com.au, we break down financial terms and concepts in a language that's easy to understand, so that our readers can benefit from the opportunity to trade in foreign exchange armed with all the knowledge required. In this post, we’re going to look at the most significant booms and busts within Bitcoin’s history, tracing the value of Bitcoin all the way back to its origins.

An Idea Becomes a Reality

Throughout this, it’s important to keep in mind that when Bitcoin started, it had no value in terms of money. It was just a concept. Considering we've reached the situation that we’re in now, with a single Bitcoin being worth over $1200, shows just how rapidly the currency has grown.

But it hasn’t been just smooth sailing for Bitcoin. There have been times when the value of the cryptocurrency crashed. In certain situations, these crashes were not long, gradual declines. They were instant, happening in a matter of hours and days.

These crashes wiped huge value off of Bitcoin, but the currency, and the community that powers it remained resilient. In time, prices recovered as Bitcoin gained a bigger user base, as well as benefiting from increased media exposure.

Media coverage has played a big role when it comes to the value of Bitcoin, just the same as it influences traditional financial markets. Investors have always watched news coverage closely in an attempt to help predict movements in currency values. However, this relationship is slightly different when it comes to Bitcoin. Many people simply were not aware of Bitcoin in its formative years. Media coverage and the word of mouth of the Bitcoin community helped change this over time.

This differs from a traditional fiat currency. These currencies are already well established, with all information fully accessible and out in the open. Bitcoin had to come from nothing, capture an engaged following, and then spread as an idea.

The Early Period: No Formal Monetary Value

The first Bitcoin "block", known as the genesis block, was created on 3rd January 2009. This is unique because of the way Bitcoin technology works. All Bitcoins are visible within a publicly accessible ledger, known as the blockchain. Within the blockchain, all mined blocks are tied to the previous and succeeding blocks, creating a direct chain. The genesis block is unique due to the fact that it has no predecessor. It’s the only block that will ever have this feat.

However, in this early period, Bitcoin had no value compared to regular currencies. There were no coin exchanges or trading platforms and there was no real way to figure out how much Bitcoin was actually worth. This caused early adopters to come up with their own value and pricing of Bitcoin, often deciding amongst themselves how to much the currency was worth.

This process of valuing Bitcoin was formalised when New Liberty Standard published the very first BTC to USD exchange rate. The value of this was $1 to 1,392.33 BTC. But how was this value decided upon? Well, in order to give the fairest price, it was necessary to work out how much it cost to produce Bitcoin.

Producing Bitcoin uses a process known as mining. To explain the process as simply as possible: mining involves computers attempting to solve an extremely complex maths problem. When the problem is solved, Bitcoins are released as a reward.

Because Bitcoin mining relies on computer technology and the use of electricity, this was factored into Bitcoin’s first evaluation. The exchange rate was worked out by calculating the amount of electricity it took to run a computer for a year, multiplied by the average cost of electricity for a year.

The Million-Dollar Pizza

Throughout 2009-2010, Bitcoin had little value and was traded internally by enthusiasts. An important moment within Bitcoin history occurred when the cryptocurrency was used to pay someone to deliver two Papa John’s pizzas to their house. This money wasn’t paid to Papa John’s directly. It was paid to someone who then ordered the pizzas, paying with their own money. The price of the pizzas was 10,000 BTC, which was roughly $25.

This is thought to be the first time Bitcoin was exchanged for physical real world goods. It has gone down in Bitcoin folklore, with 22nd May being celebrated as Bitcoin Pizza Day. Interestingly, that very sum- 10,000 BTC - costs 15,970,000 AUD today. This is how far Bitcoin has come.

July 2010 Sees Big Developments for Bitcoin

The price of Bitcoin increased tenfold in July 2010 thanks to some high profile media exposure as well as wider awareness in the general public. Following the release of v 0.3 of the core code, Bitcoin was featured on prominent tech news site Slashdot. This caused an influx of interest in the new digital currency, causing the value of Bitcoin to increase from $0.008 to $0.08 in only 5 days. Whilst not a huge sum of money, this represented an impressive 10x increase in value.

Then, on 18th July 2010, the first Bitcoin exchange opened its virtual doors. Mt. Gox, which would become the internet’s biggest Bitcoin exchange, offered a one-stop shop for users to buy and sell Bitcoin.

While the introduction of Mt. Gox didn’t cause the value of Bitcoin to immediately rise, it laid the foundation for things to come. By making Bitcoin more accessible and easier to trade, this development enabled future growth.

Parity With the Dollar: A Huge Occasion

The value of Bitcoin continued to fluctuate throughout 2010 and early 2011. However, a momentous occasion occurred on the 9th of February 2011. 1 BTC was worth 1 USD. Bitcoin was only just 2 years old and it had already reached parity with the most widely traded currency in the world.

This milestone earned Bitcoin even more media coverage, causing interest in the coin to spike again. Prices wouldn’t remain this high, with them soon dipping to lower levels. While this was occurring, more exchanges started to emerge. These allowed Bitcoin to be traded with more currencies than what was previously possible, widening the cryptocurrency’s user base.

The First Bitcoin Bubble: June 2011

This was the first true boom and bust for Bitcoin. Bitcoin’s value slowly crept up throughout 2011, before growing extremely quickly throughout May, before hitting a high of $32 in June.

Bitcoin hit the international media again within the period, with popular online network Gawker running a story heavily featuring the cryptocurrency. Soon after, the price spiked, but it didn’t last. Bitcoin soon lost 68% of its value and then entered into a long period of decline.

Bitcoin Prices Hit All-Time Highs in 2013

Although Bitcoin’s value fluctuated heavily following the first bubble, its price never reached higher than the peak of the bubble. The coin suffered several crashes throughout 2012 and the first half of 2013, losing up to 50% of its value. This period showed just how unpredictable Bitcoin ownership can be. It was looking like overall growth could slow down.

Then, in April 2013, Bitcoin broke the $100 mark. And the $200 mark. The price topped out at an all-time high of $266. But this was another bubble, and the price had halved just a month later. However, Bitcoin had definitely shown how quickly it could grow. Users and investors weren’t put off by its unstable price value. Bitcoin’s user base continued to grow and people continued to invest. If anything, such high points showed the trading opportunities behind Bitcoin.

The result was rapid growth. Bitcoin’s value rocketed throughout November 2013. Throughout this period, national governments started paying serious attention to Bitcoin. The US Senate held a hearing on virtual currencies, which chimed in on the benefits of Bitcoin. In addition to this, the People’s Bank of China went on the record to say that they did not oppose the Bitcoin market. This caused a huge wave of interest in Bitcoin from Chinese investors, resulting in one of the busiest periods on record for BTC China, the leading Chinese Bitcoin exchange.

At the peak of this rapid growth, Bitcoin had shot up in value to a massive $1,242. Yet, by December, this had come crashing back down, losing over $600. This price would not be reached again until March 2017.

Bitcoin spent the majority of 2014 and 2015 in a downwards trends. There were short-term spikes, but nothing like what had come in November 2013.

An Upward Trend Kicks in Throughout 2016

2016 was the year Bitcoin recovered from its lull. The first half of the year was slow but steady, but the real growth happened in the latter half of the year.

China played another critical part in boosting the value of Bitcoin. From October and November 2016 saw growth spurt, spurred on by the weakened Chinese Renminbi. Many Chinese investors turned to investing their money in Bitcoin.

Then things really took off at the start of 2017. Bitcoin’s price rose to $1,150, the highest it had been since 2013. But just as it had done in 2013, the price some clattered back down, falling 30% in a week from the 5th to the 12th of January 2017.

However, this wasn’t a bad thing. The lower price encouraged a new wave of investment and spending, quickly driving the price up. The result was Bitcoin hitting a new all-time high at the start of March 2017. A single Bitcoin was worth $1,290.

This price meant Bitcoin had reached parity with another frequently traded asset: gold. For the first time ever, a single Bitcoin was worth the same amount as an ounce of gold.

This is a symbolic event in Bitcoin’s history, just the same as hitting parity with the dollar is. Why? Because it represents Bitcoin being valued at the same rate as mainstays within the finance and investment markets.

Similar to previous surges in value, the events of March 2017 were heavily reported in the media, with leading publications like the BBC and CNN giving in-depth coverage around the new all-time high.

From Being Worth Nothing to Being More Valuable Than Gold

The rise of Bitcoin is one of the most interesting financial stories ever witnessed. Its difficult to imagine that in just over 8 years, Bitcoin has gone from being valueless to, at times, holding a higher value than gold.

But it’s not been plain sailing to reach this point. While Bitcoin has made lots of people great sums of money, there are winners and losers to the story. Bitcoin is volatile in nature. Prices can shift at very short notice, meaning value can be wiped off of Bitcoin reserves in a blink of an eye.

Every time Bitcoin breaks into the news, whether that be due to hitting new heights, or losing value, it earns new followers. It also wins back earlier adopters who dabbled in Bitcoin, but then forgot about the coins they own.

It is thought that up to 30% of all Bitcoin in existence may actually belong to lost accounts. In theory, this will be driving the cost of Bitcoin up even further. Only a finite amount of Bitcoins can ever be mined. If a large portion of them are destined to be out of circulation indefinitely, this reduces the supply of Bitcoin. In theory, the lower the supply, the higher the price.

However, despite all of the ups and downs, the price history of Bitcoin has largely been positive. There have been periods when the value of the cryptocurrency varied massively, and at times, nosedived. Throughout 2014 - 2015, the value of Bitcoin seriously struggled. However, the digital currency has stood up to its critics and proven resilient, bouncing back each time. For the time being, the price of Bitcoin appears to be stable. It is still trading well over $1,000.

Will Bitcoin go through another bubble? Well, history tells us it probably will. Plenty of them can seen throughout its lifetime, and it would be foolish to think that now is any different - but no one can be certain. 

And that’s the beauty of Bitcoin. As a currency, it’s so receptive to news, media, and industry developments. The right story can make or break its value, sending it soaring to new heights, or crashing to frustrating lows. Yet, this doesn’t stop people trading and investing. And why would it? Bitcoin has already proven itself capable of weathering a storm. Many thought the cryptocurrency wouldn’t make it this far, but it has, and it’s still surprising people.

Many are inspired to start investing and trading in Bitcoin once they hear about it, but find the technical aspects of it a bit daunting. That's why here at Forexbonus.com.au we try to give you all the required information you will need about where and how to trade Bitcoin and other currencies. Once you know what you want to trade, head to our home page to find the best forex offers and rebates.


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