Notice the teth (cross within a circle), which became the theta of the Greek alphabet. It has been a fairly consistant symbol down through the ages. The Old English (Saxon) itself had a single character called the "thorn" serving the same purpose as the Greek character theta, i.e., representing a phoneme having the value of "th". (Major confirmation of this can be found in an ancient manuscript of the well known epic Beowolf. The manuscript itself is presently in the library of Sir Robert Bruce Cotton, a well-to-do antiquarian and collector.)
Hundreds of years later Middle English had a character with the same vocal sound, which was written , very similar to our y. Once printing was invented, they used the letter y to stand for the thorn. This means that the familiar "Ye Olde Gifte Shoppe" was in reality pronounced "The Olde Gifte Shoppe", much as we would say it todaythe initial was not spoken as a "y" but as a "th". The digraph represents one or the other of two allophones, one voiced and one voiceless: the voiced dental fricative ð (as in "this") and the voiceless dental fricative θ (as in "thing").
English originally inherited the phoneme th in positions where other West Germanic languages have d and most other Indo-European languages have t (English thou, German du, Latin tu). In Middle English, the phoneme represented by , like all fricative phonemes in the language, had two allophones which were distributed regularly according to phonetic environment. And these were both written or printed as .
The modern "you" is actually derived from the earlier Middle English ("thou"), due to the confusion of the digraph with the ordinary letter "y". I had long suspected this, but making a solid confirmation of this fact took a little research on my part. Of help, in this regard, was a reproduction of a Resolution of the General Court of the Colony of Massachusetts Bay passed in 1647. Other similar findings served to confirm the above contention beyond any doubt.