The History of Bitcoin in One Chart (And it Says Nothing About Prices!)

(Originally published June 8, 2018 on LinkedIn)

An amazing chart from Morgan Stanley, cited by the Financial Times, sheds new light on the Bitcoin and cryptocurrency phenomenon. As is usually the case, good data and good stories are mutually reinforcing. The chart alone doesn’t tell us why things are happening, or even entirely what things are happening. Instead, it helps understand what events in the real world were significant. And offers evidence to support hypotheses, whether about the past or the future. Almost no piece of data from the chart is new, but seeing it laid out in one place is revealing.

Four Eras of Bitcoin

There have been four distinct eras in the relatively brief history of cryptocurrency. The early hobbyist days went from Bitcoin’s 2009 launch to the rise of two dominant platforms: the Mt. Gox exchange and the Silk Road dark marketplace. There was turmoil when both collapsed between late 2013 and early 2014. The price of Bitcoin plummeted from over $1000 to under $300, where it largely stayed for two years.

In 2014–2016, activity diversified away from Bitcoin, in two directions. First, Ethereum and other platforms generalized Bitcoin’s digital currency into a mechanism for decentralized applications and services. Second, enterprises and governments got excited about distributed ledger systems that added a permission layer to Bitcoin’s open network. These were the days of…