Bitcoin has recently recorded a fall to one of the lowest values this year amounting to losses up to 25% in a span of one week.
Bitcoin enjoyed a period of relative stability for several months when its value was hovering around 6500$ until a sudden plunge last week. The value of bitcoin has now plunged to 4300$, a value significant considering its status as one of the world’s most famous cryoptocurrencies. Its smaller brothers, the smaller coins also fell sharply owing to a broader cryptocurrency sell-off caused by heavy selling at the Asian exchanges which are leveraged. As per Mati Greenspan, senior market analyst at eToro, as a result of price of bitcoin staying so steady over a long period, a lot of investors have placed stop loss orders and the massive triggers it has generated has caused this break out.
Ripple’s XRP and Ethereums’s ether, considered the second and third largest cryptocurrencies, also recorded a fall by 14 and 16% respectively. This recent fall is in sync with the broader falls in financial markets across Europe and the Wall Street.
The fall of Bitcoin started from its peak value of 20,000$ last December, after which the crypto has plunged over 75 percent as retail investors have infused more and more money into one of the largest bubbles in financial history.
CASINO MENTALITY
Market experts and traders have pointed out that heavy selling across Asian exchanges like OKEx and Bitmex based in Hong Kong have been heavily leveraged and led to Bitcoin’s slide because of overwhelmingly high rates of selling. In contrast very few exchanges in the West lend cryptocurrency to traders, making the Asian markets a favourite of the speculators.
This risking behaviour for leverage is considered less of an investment more of a gambling i.e, casino mentality by experts. Some are also of the opinion that fears that recent “hard fork” in bitcoin cash, where the biggest cryptocurrency has split into two different currencies because of a software upgrade might destabilise the other cryptocurrencies. The market value of bitcoin appears to be sensitive to how the underlying networks evolve over time. The suspension of hard fork as planned by major investors and software developers last year has led to its meteoric rise.
TOUGH BILLING
Because of little regulatory bindings and nascent development of a market infrastructure, traditional investors have tried to stay clear of Bitcoin investments. This has also been contributed by the frequent swing in its price. This lack of involvement has contributed to failure to be used as a payment currency. Thus, bitcoin has struggled to live up to its expectation of revolutionising world finance.
This, on the other hand, has allayed fears from regulators and central bankers that it could one day destabilise financial markets across the world.
The net value of cryptocurrencies, which was 800$ billion at its peak, is now estimated to be at 154$ billion, according to watchdog Coinmarketcap.com.
Advocates of cryptocurrency still hold hopes that it being a young currency, a certain degree of price volatility can still be expected. Some also are of the opinion that virtual currencies need to operate outside the bindings of mainstream banking, which may render the currency virtually unaffected short term price falls.
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