My first conversation about Bitcoin and arbitrage trading, Looking back from 2012 to 2023
TL;DR: In 2012 my friend Julian explained Bitcoin exchanges and arbitrage trading to me, and I bought a burger at Room77 in Berlin for 1 Bitcoin. In 2023 arbitrage still exists but the competition is much harder, and the risks have not gone away. Trading or building a company, what matters is that you can adapt and really understand the market.
In 2012 I had a conversation with my friend Julian about Bitcoin and the financial markets, and it really opened my eyes. That same year my first Bitcoin purchase was at Room77 in Berlin, where I gave 1 Bitcoin for a burger. Bitcoin was still pretty new then, and we talked about a lot of things, the technical side of trading but also the bigger question if you should build a company or trade the markets. When I think about that conversation today, it's interesting how much has changed and how much is still the same.
Exchanges and arbitrage then and now
In 2012 Julian told me about internet exchanges for digital currencies like Bitcoin. A lot of them had JavaScript APIs for automated trading, and that was quite advanced for that time. In 2023 these exchanges have changed a lot. They have many more features, like futures trading and staking. And regulation has become a big factor, so there is a layer of security that mostly didn't exist in the early days.
Julian had some experience with arbitrage trading between different Bitcoin exchanges. He explained it to me as buying and selling on different markets, because the same asset has different prices there. The catch was that it only works until more people find out about it. In 2023 arbitrage still exists, but it happens much less and the competition is much harder. With algorithmic trading and faster information it has become a high stakes game and you need good tools and strategies for it.
Risk, and what my Bitcoin purchases cost me
One part of our conversation in 2012 I remember well is about the risks of Bitcoin trading. I asked if this was even legal, and Julian said it's not illegal but it can be risky. In 2023 the rules for Bitcoin are clearer, but the risks have not gone away. The price still moves a lot and Bitcoin had several big price changes over the years. In December 2017, for example, it reached an all-time high of nearly $20,000.
My second Bitcoin purchase was also at Room77, and I bought a salad and a hot tea for 0.46 Bitcoin. The all-time high for Bitcoin that I know of is that nearly $20,000. So my first burger cost me what could have been $20,000, and the salad and hot tea could have been worth around $9,200 at that peak. For me these purchases show how much Bitcoin moves, and that you can win a lot with it and also lose a lot.
Trading or building a company
At the end of the conversation I asked myself if it makes more sense to really understand the Bitcoin markets or to put my energy into starting a business. Julian thought trading is hard to make profitable, especially if you don't have a lot of money to put in. In 2023, with all the blockchain startups and with crypto going mainstream, it looks like both ways can pay off well, but both come with their own problems and risks.
Looking back, that conversation with Julian in 2012 was a snapshot of Bitcoin at that time. It was about trading strategies like arbitrage and about the risks and the uncertainty of this new digital asset. Now in 2023 a lot of those early questions have answers, but there are new problems and new opportunities. Trading or building a company, what matters is that you can adapt and that you really understand how the market works.