Bitcoin Ends 2016 as World’s Best-Performing Currency: A Year of Halving, Hacks, and Historic Gains

As Christmas 2016 arrived, Bitcoin was cementing its status as the best-performing currency of the year. Trading at approximately $899 on December 24, Bitcoin had nearly doubled from its January 1 starting price of around $434, crushing every major fiat currency, stock index, and commodity in the process. The remarkable rally was fueled by a confluence of technological milestones, institutional interest, and growing global adoption — but the year was anything but smooth sailing.

TL;DR

• Bitcoin named best-performing currency of 2016 by Bloomberg, nearly doubling from $434 to $899
• Bitcoin rallied approximately 18% in the week before Christmas, breaking through $900
• The second halving event in July 2016 reduced block rewards from 25 to 12.5 BTC
• China issued new regulatory guidance on crypto exchanges in December 2016
• Total cryptocurrency market cap stood at approximately $15.3 billion

The Halving That Started It All

The defining technical event of 2016 for Bitcoin was the second block reward halving, which occurred on July 9. This programmed reduction cut the number of new Bitcoin created per block from 25 BTC to 12.5 BTC, effectively halving the rate of new supply entering the market. While the immediate price impact was modest, the halving set the stage for the dramatic supply squeeze that would define the months ahead.

Historical precedent was on Bitcoin’s side. Following the first halving in November 2012 — when block rewards dropped from 50 to 25 BTC — the price had risen from around $12 to over $1,000 within a year. While past performance never guarantees future results, the parallel was not lost on the growing community of Bitcoin investors and traders who had begun watching these supply dynamics closely.

A Rally That Crushed Everything

By mid-December, Bitcoin’s year-to-date gains had caught the attention of mainstream financial media. Bloomberg declared it the best-performing currency of 2016, outpacing every major foreign exchange trade, stock market, and commodity. The rally accelerated in the final weeks of the year, with Bitcoin surging roughly 18% in the week leading up to Christmas, breaking decisively through the $800 level before pushing above $900.

The total cryptocurrency market capitalization stood at approximately $15.3 billion on December 24, 2016. Bitcoin dominated with a market cap of $14.4 billion, while Ethereum held second place at approximately $634 million. Litecoin traded at $4.55, Monero at $9.65, and XRP at just $0.006. These figures, modest by the standards of later years, represented a rapidly growing ecosystem that was beginning to attract serious institutional attention.

China’s Regulatory Intervention

December 2016 also brought significant regulatory developments from China, which had long been the center of Bitcoin trading activity. Chinese authorities issued guidance to cryptocurrency exchanges that prohibited zero-fee trading and imposed stricter anti-money laundering and foreign exchange controls. The moves were part of a broader effort by Chinese regulators to bring the burgeoning crypto industry under greater government oversight.

The regulatory intervention had an immediate chilling effect on Chinese trading volumes, which had previously accounted for the majority of global Bitcoin trading activity. Some exchanges were forced to adjust their business models, while others chose to restrict services. The European Parliament, by contrast, was taking a notably hands-off approach, allowing blockchain innovation to develop with minimal regulatory interference.

The Year of Ethereum and the DAO

While Bitcoin dominated the headlines with its price performance, 2016 was equally significant for Ethereum. Ether started the year at roughly $0.93 and surged to a peak of around $19 by mid-June, driven by excitement about smart contracts and decentralized applications. Then came The DAO — a decentralized autonomous organization built on Ethereum that raised over $150 million in a crowdsale from more than 11,000 investors.

In June 2016, an attacker exploited a vulnerability in The DAO’s code and siphoned approximately 3.6 million ETH. The ensuing crisis led to a contentious hard fork of the Ethereum blockchain, creating two separate chains: Ethereum (ETH) and Ethereum Classic (ETC). By December 24, ETH was trading at $7.27, significantly down from its peak but still representing extraordinary growth from its starting price. ETC had carved out a market cap of approximately $91 million.

ICOs: A New Fundraising Paradigm Emerges

Perhaps the most lasting innovation of 2016 was the rise of Initial Coin Offerings as a new mechanism for project fundraising. Golem raised $8.6 million in just 20 minutes for its vision of a decentralized computing network. ICONOMI, a digital asset management platform, raised approximately $10.5 million. The trend would accelerate explosively in 2017, raising both excitement and regulatory concerns about investor protection in an entirely unregulated fundraising environment.

Why This Matters

The Christmas 2016 snapshot of the cryptocurrency market captures a pivotal moment of transition. Bitcoin was proving its viability as a store of value following its second halving. Ethereum was demonstrating both the transformative potential and the significant risks of programmable money. The regulatory landscape was beginning to take shape, with China taking a hard line while Europe remained permissive. And the ICO model that would define 2017’s crypto explosion was just beginning to gather momentum. For anyone seeking to understand the forces that would drive the historic 2017 bull run — which would see Bitcoin surge past $19,000 — the foundations were all clearly visible in the final weeks of 2016.

Disclaimer: This article is for informational and historical purposes only and does not constitute financial advice. Cryptocurrency markets are highly volatile, and past performance is not indicative of future results.