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The bitcoin bubble 2013

Bitcoin is a new digital currency. This mean it exists only digitally, not in a printed form. It is a so called cryptocurrency, secured or based on cryptographic algorithms. A bitcoin is created through a process called 'mining', which is a calculation process done by a computer - each bitcoin is unique and has to be created through mining. Because of this, the total amount of possible bitcoins is limited and also the possible yearly influx of new bitcoins as the mining process is time consuming. Bitcoins can be used to pay in some online shops, but it is also possible to exchange them versus 'real' money, like dollars. Below is a chart of the price of 1 bitcoin in USD.

What can happen if a 'scarce' resource meets increasing demand could be seen in the years 2013/2014.

Starting with a few users, the bitcoin community grew as more people became curious and media attention increased. This then lead to rising prices in the mid of 2013. At some point, speculation on increasing prices spread, and more and more bitcoins were demanded, prices grew faster (the exponential increase we see in nearly all bubbles). But at some point the speculation turns to ruin, as not enough buyers were available to support the high price index.

Bitcoin price chart