Dawn of Bitcoin price discovery 2009 – 2011: The very early Bitcoin exchanges

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by Ronan Manly, BullionStar:

With the rapid growth of Bitcoin and the proliferation of cryptocurrency exchanges, it’s easy to forget that a mere 12 years ago, there were no trading markets for Bitcoin and no market established Bitcoin prices.

In fact, following the mining of the first Bitcoin block on 3 January 2009 by the eponymous Bitcoin creator Satoshi Nakamoto, it would be another 9 months until the first known Bitcoin price was recorded on 5 October 2009.

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Some common themes among the early Bitcoin exchanges were that they were operated more or less as one man outfits, they quoted extremely low Bitcoin prices, the exchanges had limited interest even among the Bitcoin hobbyists, and the exchanges were prone to attacks from hackers and fraudulent activity.

New Liberty Standard (NLS)

The first known Bitcoin price, or exchange rate, recorded on 5 October 2009 was published on what was the world’s first Bitcoin exchange site, New Liberty Standard (NLS), a site which offered a service to buy and sell Bitcoins in exchange for US dollars using PayPal. The site was operated by “NewLibertyStandard”, who was a frequent contributor to the early Bitcoin forum Bitcointalk.org, and who discussed his exchange site on the forum in posts such as here.

The very first Bitcoin / USD exchange rate published on the New Liberty Standard site on 5 on October 2009 was USD $1.00 = 1,309.03 BTC, which equated to an incredible $0.00764 per Bitcoin, or in other words 7.6 US cents per 100 Bitcoins.

NewLibertyStandard calculated this exchange rate using a formula based on:

“dividing $1.00 by the average amount of electricity required to run a computer with high CPU for a year, 1331.5 kWh, multiplied by the average residential cost of electricity in the United States for the previous year, $0.1136, divided by 12 months divided, by the number of bitcoins generated by my computer over the past 30 days.”

New Liberty Standard’s first Bitcoin / USD prices, 5th – 11th October 2009. Initial price 1,309.03 BTC per USD

As you can see, this Bitcoin price in the early days was determined not by buying and selling activity of Bitcoins, but by the price of electricity and the site owner’s personal Bitcoin mining output. The calculation became a bit more complicated in early 2010 using rolling averages and the addition of broadband internet costs, and can be seen in another archive imprint from the New Liberty Standard site in late April 2010 here.

A list of the daily USD / Bitcoin prices between 5 October and 28 December 2009 can be seen on a 29 December 2009 Wayback Machine (Archive.org) imprint of the New Liberty Standard exchange rate page here.  If the Wayback Machine page is slow to load, these historic exchange prices can also be seen on NewLibertyStandard’s webpage here.

28 Dec 2009: NLS quoted that it would sell  1,578.76 Bitcoins for US$ 1.00 plus a Paypal transaction fee.

The best rate quoted for buying Bitcoins on the NLS exchange in 2009 was on 17 December 2009 when you could buy an incredible 1630.33 BTC for US $1.00.

NewLibertyStandard was also known to Satoshi Nakamoto, as for example, Satoshi thanked NewLibertyStandard on 16 December 2009 for helping to test Bitcoin 0.2 (see Bitcointalk discussion topic here).

Interestingly, it was NewLibertyStandard who came up with the Bitcoin symbol ฿ and the Bitcoin ticker BTC, when on 5 February 2010 he posted on the Bitcointalk.org forum that:

“I propose that we adopt the Thai baht currency symbol, ฿, as the official bitcoin currency symbol and BTC as the official bitcoin three letter currency code.”

NewLibertyStandard proposes BTC ticker code and Thai baht ฿ for use as Bitcoin symbol

In early October 2009, there was also an historic Bitcoin / USD transaction which consisted of a Finnish programmer and early Bitcoin supporter named Martti Malmi selling 5050 BTC to NewLibertyStandard for US$ 5.02, which was the equivalent of 9.94 US cents per 100 Bitcoins.

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