Many Bitcoin investors are panicking over the currency’s recent “crash”, with media outlets and analysts speculating as to whether the Bitcoin “bubble” has popped.
Over the period of 14-17 January 2018, Bitcoin’s value plummeted from $14,000 to under $10,000, before recovering slightly.
This sharp drop in value caused widespread panic among investors, with many labelling the price movement “Bitcoin’s crash”.
The recent price drop also followed Bitcoin declining in value from around the $20,000 mark at the end of 2017.
Before asserting that Bitcoin has crashed, however, it is important to take note of the cryptocurrency market as a whole and Bitcoin’s relative performance.
Bitcoin’s recent price drop did not occur in isolation, and almost every major cryptocurrency has experienced large value drops during the week.
Cryptocurrencies like Ethereum, Monero, Ripple, and Litecoin all plummeted in value – with most falling more than Bitcoin before recovering.
The top 10 cryptocurrencies on the market all fell just as much – or even more than – Bitcoin in value, signifying that it is not Bitcoin which lost value, but the entire cryptocurrency market.
There was a large outflow of money from the cryptocurrency market in recent days, with the global cryptocurrency market cap dropping from over $700 billion to $400 billion.
Bitcoin is the biggest cryptocurrency in terms of market cap, but it only accounts for a third of the cryptocurrency market – and is affected by market-wide events.
The cryptocurrency market is volatile, and while Bitcoin’s value fell by around 30% this week, the dip is a relatively minor occurrence compared to its long-term trend.
A look at CoinMarketCap shows that coins like Ethereum and Ripple were also hit by big drops this week.
While the drop in Bitcoin’s price has made many new crypto investors uneasy, a look at Bitcoin’s year-to-date growth put matters into perspective.
On 18 January 2017, Bitcoin was trading at $901. On 18 January 2018, the day after the “Bitcoin crash”, the currency was trading at $11,000.
This is a year-on-year growth of almost 12,000%.
Looking at the cryptocurrency’s value in these terms shows that it has not crashed, and its recent drop in value is relatively small compared to its overall movement.
The event does portray an outpouring of funds from the cryptocurrency market, however, which may be due to a number of reasons.
Analysts have speculated that the recent drop could be attributed to a crackdown by regulatory authorities, technical triggers, or problems at exchanges.
Whatever the reason, Bitcoin remains relatively strong, suffering less from the major dip than other coins.
Cryptocurrency remains a volatile and unregulated market, though, and buyers must not invest more than they are willing to, or can afford to, lose.
This is an opinion piece, and is not intended as investment advice. Always research a cryptocurrency before investing in it.
Jamie McKane – https://mybroadband.co.za/news/cryptocurrency/245195-what-bitcoin-crash.html