Why is Bitcoin price dropping explained by professional forex trading experts the “Forextrading.biz” cryptocurrencies experts.
Why is Bitcoin price dropping more than 30 percent in less than one day
You can’t exactly say that Bitcoin was burning a hole in anyone’s pocket, but the virtual currency burned a hole in quite a few hearts on Friday when it plunged 30 percent in less than 24 hours after defying gravity for the past few months.
Many skeptics of the virtual currency, which operates with no government or company in charge, have predicted that it was in bubble territory and due for a collapse.
Still, the drop to around $12,000 a Bitcoin from around $17,500 was enough to set off a panic among buyers, even while stock market investors remained calm and much of the world, unaware that Bitcoin exists, was oblivious to the uproar.
On Reddit, the online forum visited by many Bitcoin followers, people posted phone numbers for suicide hotlines for bereft investors. A popular service that sells Bitcoin to many individual investors went down, overwhelmed by orders.
“If someone is depressed by the sudden drop in price, remember that many of us are going through the same thing,” read one post on Reddit, which got more than 400 responses. “Please don’t think nothing crazy. You can use my thread to vent.”
Bitcoins can be used to pay for things online, but they have mostly been treated as an investment because there is a cap of 21 million on the number of Bitcoin that will ever be released. The records of all Bitcoins are maintained by a network of computers around the world. The creator of Bitcoin, someone using the name Satoshi Nakamoto, has never been tracked down, though many have tried.
For a time, Bitcoin was known as the currency of drug dealers and other bad actors skulking on the internet. In recent months, hedge funds and ordinary investors around the world have piled into Bitcoin, lured by the promise of a borderless digital investment with no one in charge. That has pushed the price of Bitcoin up from $1,000 at the beginning of the year to more than $19,000 this week, with its run-up raising comparisons to the Dutch tulip mania of the 1600s and the late 1990s dot-com boom.
Yet when the virtual currency, which is highly volatile, experienced its fall late Thursday and early Friday, many of its new fans were unprepared. The downturn hit not just Bitcoin, but almost every other virtual currency that has soared over the last year. Ethereum, and lesser-known tokens like EOS and ZCash, fell even more sharply than Bitcoin.
Vadim Semenov, 24, a programmer in New York, had maxed out the credit lines on two credit cards to buy $35,000 of Bitcoin on Monday, when the currency’s price was briefly above $19,000. Bitcoin’s dive left him feeling unmoored on Friday morning.
“I panicked a lot, and was checking everything to find news about why it is dropping,” he said.
By late Friday morning, he had decided to sit tight. And by Friday afternoon, the virtual currency markets had regained some of their composure, leaving the price of Bitcoin down from earlier in the week — but still 1,200 percent higher than where it began the year.
Currently, the average price of one Bitcoin is about $14,158, according to Blockchain.info, a news and data site.
Although Bitcoin has left behind some of its associations as a black market currency, the infrastructure surrounding the virtual currency is still largely unregulated and untested.
The flood of new users into the virtual currency in recent weeks has put stress on that loose system. The trading platform Coinbase, a San Francisco company that has become the primary place where ordinary Americans have purchased Bitcoin — and is one of the most highly regulated companies in the industry — has gone down at several points under the weight of so many new investors. That happened again on Friday when Bitcoin’s price was plunging, leading to agony for many people who wanted to sell along with the rest of the crowd.
For people who have been loudly saying that Bitcoin is a bubble or even a fraud of some sort, Friday’s jolt was a vindication.
William F. Galvin, the Massachusetts state securities regulator who has cautioned investors about Bitcoin in the past, put out another warning on Friday. “Bitcoin is just the latest in a history of speculative bubbles that most often burst, leaving the average investors with a worthless product,” he said. “Recent developments indicate that this so-called currency is not a secure investment.”
The volatility appeared to cause some second thoughts for even sophisticated investors.
Michael Novogratz, a former Goldman Sachs partner, said a few months ago that he was starting a $500 million virtual currency hedge fund and expected the price of a Bitcoin to hit $40,000. On Friday, he told Bloomberg that he had called off the plans for the fund because he did not want to deal with the “schizophrenic emotional side of it.” He also said he thought Bitcoin could fall as low as $8,000, at least in the short term.
This is not the first time that Bitcoin and other virtual currencies have been through a boom-and-bust cycle. In 2013, Bitcoin’s price rose first to above $200 before crashing. Later that year, an investing mania in China drove the price to another high above $1,200, followed by yet another plunge.
Anyone who got in during those earlier run-ups is still easily in the money. The Winklevoss twins, Cameron and Tyler, had $11 million of Bitcoin in 2013 and watched it rise to $1.3 billion earlier this week. Even with Friday’s declines, those holdings are still worth more than $1 billion.
Longtime investors said that Friday’s drama is probably a healthy reminder that Bitcoin is still an investment where people should only have money that they are willing to lose.
“It’s a healthy speed bump that will remind people of the newness of the space, and inherent volatility that goes with it,” said Chris Burniske, author of the book “Cryptoassets,” which is about virtual currencies.
Mr. Semenov, who maxed out his credit cards to buy Bitcoin this week, first got into Bitcoin in 2014 when it was at $700 and sold when it dropped to $300 that year. Watching Bitcoin rise since then is what convinced him not to sell on Friday.
“I already once made a mistake of dumping everything,” he said. “This year definitely showed that adoption is not going to slow down.”
Why is Bitcoin price dropping Conclusion
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