Bitcoin researcher Tim Swanson traced Bitcoin's 2013 surge to wealthy speculators accumulating coins. His reading of Nathaniel Popper's Digital Gold identified large purchases of bitcoin as the source
Bitcoin researcher Tim Swanson traced Bitcoin's 2013 surge to wealthy speculators accumulating coins. His reading of Nathaniel Popper's Digital Gold identified large purchases of bitcoin as the source of price movements, not the block reward halving from late 2012.
Roger Ver began buying bitcoins in 2011. He wired $25,000 to Mt. Gox, then operated by Jed McCaleb. Popper recorded the impact: "Over the next three days, Roger's purchases dominated the markets and helped push the price of a single coin up nearly 75 percent, from $1.89 to $3.30." Popper continued: "Roger alone bought tens of thousands of coins in 2011, when the price was falling, single-handedly helping to keep the price above zero (and establishing the foundation for a future fortune)."
In early 2013, the Winklevoss Twins began accumulating 1 percent of all bitcoins in existence. Charlie Shrem at BitInstant executed the purchases for them. Fortress Investment Group investors were buying at the same time. The price climbed from $13 to $18 during early 2013. Popper documented the momentum: "Together, these purchases helped maintain the sharp upward trajectory of Bitcoin's price, which rose 70 percent in February after the 50 percent jump in January. On the evening of February 27 the price finally edged above the long-standing record of $32 that had been set in the hysterical days before the June 2011 crash at Mt. Gox."
Several wealthy entrepreneurs and investors met for a retreat in Tucson, Arizona. Wences Casares explained bitcoin to Marc Andreessen, Chris Dixon, Dick Costolo, David Marcus, and others. Henry Blodget, CEO of Business Insider, attended. Prices jumped during the conference. Popper documented the surge: "On Monday, the first full day of the conference, the price of Bitcoin jumped by more than two dollars, to $36, and on Tuesday it rose by more than four dollars — its sharpest rise in months — to over $40."
The buying continued through March. Popper noted the ultimate result: "They helped push the price to over $90 in the last week of March. At that price, the value of all existing coins, what was referred to as the market capitalization, was nearing $1 billion."
Swanson outlined the argument: "At least a dozen or so high-net-worth individuals collectively bought tens of millions of dollars worth of bitcoin. The demand of which resulted in a rapid increase in market prices. This had nothing to do with the block reward halving, just a coincidence."
Supply was finite. Demand came from sophisticated investors with serious capital. These buyers together accumulated tens of millions of dollars in bitcoin. Their purchases moved the price.
