Bitcoin History Part 20: BTC Reaches $1
It was a milestone that Bitcoin loyalists had long anticipated. Nevertheless, a toast was in order the day BTC reached parity with the US dollar. February 9, 2011 was the historic date, and over on the Bitcointalk forum, talk inevitably turned to what this meant for the nascent cryptocurrency.
Also read: Bitcoin History Part 19: Wikileaks and the Hornet’s Nest
‘It’s Gonna Be Another Wild Ride’
This was the prediction by forum member ‘jimbobway,’ who had opened a thread entitled “Parity Party!!!” on January 11, 2011. USD parity was still some weeks away, but the writing was on the wall. Years on, the subsequent discussion makes for interesting reading, presenting a snapshot of views from the small but hardcore Bitcoin community.
Needless to say, perception varied. One take, from forum member FatherMcGruder, was that “meaningful parity” would only occur when “the number of bitcoins in circulation equals the value of the US dollars in circulation. If that happened today, 1 BTC would trade for about 390,000 US, I think.”
Hal Finney, meanwhile, seemed cognizant that he and his cohorts were witnessing something monumental: “We are really lucky to be in at the beginning of a possibly explosive new phenomenon. Considering the odds against money-tripling investments, Bitcoin looks like a good place for a percentage of your portfolio.”
“Possibly explosive” was correct. Not only would Bitcoin hit $1 a month later, but by June it would surge to $31.91.
Dissenting Voices at the Party
It should be noted that not every forum member was popping champagne. One person seeking to temper expectations was Bitcoin developer Mike Hearn, who pondered: “The question is really – will it stay above dollar parity or not?”
Another thoughtful take came from a forum newbie going by the name Veltas. While some members might have regarded him as an importunate party-pooper, his honest assessment was laced with insight:
These are all meaningless (especially USD parity). Bitcoin’s worth as much as [we] want it to be and until we get that very simple idea into our heads, we’re not going to be able to comprehend when we really should be celebrating. For one thing I guarantee that it will continue soaring up and won’t stop at USD parity, or GBP parity. Nope, it’s gonna continue for a very long time.
“The only good thing about this is your current BTCs are worth much more than they were before, well done; you’re all slightly richer. The bad news is I bet your bottom dollar you don’t have the share of BTC you want yet, and although you never will, it’s going to be harder to get BTC with inflation.
“This is all really simple stuff, BTC parity with USD is about as special as BTC’s birthday; celebrate it if you will but don’t take any heed. And yes, “the number of bitcoins in circulation equals the value of the US dollars in circulation” is also not special, since that is down to the value behind the money and even then it all boils down to which one’s more stable. So again, stop trying to find value in numbers that mean very little and can help us with not very much.”
What Dollar Parity Really Meant
While Hearn and Veltas made interesting points, enthusiastic forum members could be forgiven for making a song and dance about the news. The fact is, just two years after launching, the open source, peer-to-peer cryptocurrency had gone from having no value whatsoever to being on par with the US dollar, the largest reserve currency on the planet. Six years later, it would trade at parity with an ounce of gold. So much for an “abstract form of money.”
Veltas didn’t stop dropping truth bombs, incidentally, taking umbrage with a user who suggested Bitcoin might become mainstream: “If the government attempts to regulate it (which is inevitable after being mainstream for long enough) then attempting to convert bitcoin into goods and such would be taxable. If the government thinks Bitcoin is a mainstream commodity they can tax on it, because in any trade you stand to gain and anything you gain that the government recognises is taxable.”
Back then, the IRS was still figuring out what to do with Bitcoin. Of course, in recent years the agency has repeatedly asserted that virtual currency transactions are taxable by law, and that those who fail to report their crypto income may incur penalties and interest. Veltas’ “Please not mainstream” plea very much aligned with early BTC adopters, who wanted to keep the government out.
Interestingly, the Bitcointalk thread went cold on February 10, 2011, only to be revived on April 12, 2015, when member ‘americanpegasus’ had a chuckle about Hal “getting all hot and bothered about the price of bitcoins tripling and hitting a full dollar … Rest in peace, sweet prince. What parity comes next? When the total value of bitcoins exceeds gold? M1? Global Product?” The current generation of bitcoiners look forward to having those conversations in the years to come.
Bitcoin History is a multipart series from news.Bitcoin.com charting pivotal moments in the evolution of the world’s first and finest cryptocurrency. Read part 19 here.
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