In recent years, the crypto market has been very volatile. When you take a glance in the recent past, you will notice that the crypto market has been a bit volatile. Currencies like Ethereum have dropped in value significantly. Even Bitcoin, although it has proven resilient, has had its overall price decrease from $611B to around $478B since the beginning of 2018. There are many reasons that have been put forward trying to explain this. These price fluctuations could be as a result of several factors. There have been several regulatory issues pertaining to its trade and recent government actions to reduce the transfer of Bitcoins. Another speculation is that most cryptocurrencies have simply not reached their potential value and will continue to drop until they see wider reception from consumers and businesses.
Since it peaked at $19,783 in 2007, Bitcoin has lost more than 50% of its market cap. Today, it is worth around $55K. It has continuously shown a steady downward trend through the second half of 2018 with many other cryptocurrencies following not far behind. General interest in Bitcoin and its related jobs has also declined. However, blockchain gigs have maintained their stability, perhaps suggesting that the drop is only seasonal.
So, what are the reasons behind Bitcoin’s value decline?
1. Manipulation of the industry
There could be a chance of foul play in the market. Like any other market in the world, including cannabis real estate and the cannabis business in general, Bitcoin also has huge investors that have some influence over the trade. A group of around 1000 investors owns up to 40% of all Bitcoin. This gives them the ability to change the market’s direction to wherever they please. They have enough stake in Bitcoin to tip its scale.
These huge investors could simply make Bitcoin appear to have ‘huge traffic” and value by making a series of high transactions back and forth consequently inflating its value.
The purpose of this would be to sell off at the highest attainable price. They would then induce a crash by making massive sell-offs of their stock. The investors make good money by selling off at high prices, then dropping the market to a very low record value, then buying back in. This is how a few individuals end up making a lot of money with bitcoin.
2. The Bitcoin cash confusion on Coinbase
The beginning of 2018 was marked by an announcement by Coinbase to support BCH (Bitcoin Cash) on its platform. This brought huge in-fighting between the BTC and BCH communities, over which was the ‘true” Bitcoin. Nobody knew where the ‘true” Bitcoin stood at. The argument consequently brought huge attention to this topic. Many people knew BCH could probably end up in Coinbase.
To no surprise, BCH gained significant value out of the blue. Traders then started complaining that insider trading was in action. To counter this, Coinbase had to shut down BCH trading to launch an internal probe into the internal trading saga. Barely a day later, BCH was back in play in Coinbase. The back-and-forth tussle between BCH and BTC caused a lot of confusion among traders, which has then kept them from trading further.
3. Hacking and regulations
When December of 2017 began, the SEC (Securities and Exchange Commission) held PlexCoin on charges of being an ICO scam, suspending trade in the crypto company. The company was held over concerns on adequacy and adequacy of information, together with manipulation of their stock.
At around the same time, on December 20, Youbit announced its closure after allegations of being hacked, losing 17% of their assets.
In addition, the astronomical energy costs by Bitcoin mining have continued to tarnish the whole business. There is a probability that the concerns raised by these issues have driven-off potential investors and active participants.
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4. The onset of crypto winter
Many people have little or no experience studying market trends. Bitcoin has been extremely volatile ever since 2017. Its rise and fall are just as important as its disadvantages and advantages. Its notorious volatility should pose as a warning to future investors, advising them how to go about investing in it. Rise and fall in value are inevitable. But people only seem to ignore this characteristic feature. A great number of new participants have joined the Bitcoin family. Such people have little or no experience navigating the market. When Bitcoin drops in value, a storm of loss hits these people.
Cryptocurrencies rise and fall in value every year. There has been a steady decline in Cryptocurrency investment over the last few years. However, it should not be a surprise when crypto experiences a resurgence and rise in value once again.