What's Happening to Bitcoin? 12 Reasons.
COLD COIN DECEMBER
In the last few weeks alone, you may have noticed a noteworthy descent in both Bitcoin and Altcoins. Analogously, we went from 35,000 feet on a Boeing 747 to about 15,000 feet in the equivalent of about 3 minutes. A bit of a disturbing ride, with plenty of turbulence. Bitcoin’s all time high as of this press is $19,205.11, and currently trading at $7,292.15. This accounts for a total drop of 62% from its high on December 17, 2017, just about seven weeks ago. I prefer to call it “Cold Coin December,” because the reality was disorganized awareness, holiday spirits, and the cold hard truth for late adopters and speculators that while things seemed very hot, it was actually as chilling as December winter air. Deceiving,really. December was not likely the best time to buy coin.
The majority of this loss came in January 2018 as Bitcoin had a high of $17,026.28 in the first week of January, a 50.5% of the loss in the last month alone. Rather than go over the hundreds of Altcoins available on various exchanges, it’s fair to say that if you have invested in Bitcoin, or just about any coin in the last month, you have not likely made any money, but rather lost quite a bit of value depending on your trade date and time. There are the minor exceptions whereby the damage hasn’t been quite as severe, such as Ripple and Ethereum. But those are just the first class seats on the plane, so maybe it was just more comfortable price falling with a few glasses of wine in you. Ethereum does use blockchain, in a different way than Bitcoin, and is faring better, but still at a loss of 49% from it’s high, and falling sharply as of this publication.
SO MUCH AS A SNEEZE
Remember that coins and coin wallets don’t actually concretely exist. You can’t touch them. Best you’re going to get is to smell your computer and hope it smells like money. Otherwise exchanging it back to regulated currency is your best bet. I’ve been asked numerous times lately, “Sell?” I can’t answer that as I don’t have my time machine up and running just yet, but here is a bit of humble guidance about the markets in general.
The coin market is just as an easily influenced by speculation as any other market. A few analogies. If an undesirable article comes out about something regarding a publicly traded company, the stock tends to dip. If one single person of reasonable authority in the Middle East suggests any conflict with a neighboring country, a barrel of oil and gas prices tend to rise. And a good jobs report, as was noted just the other day made the Dow Jones industrial average go down 666 points in one day on fears of interest rate hikes. Note I said “fears,” not that it actually will or is guaranteed to happen. Take comfort that it was actually a 665.75 drop and the media crept up its rounding to freak everyone out; as they seem to enjoy. And finally, if someone sneezes in your direction, you don’t walk into it, do you? Bad news moves markets better than good news. Period.
And then sometimes there is simply no reason at all other than the human factor. Fear, ill perceptions, learning curves, or simply becoming immune to topics that once would have crashed markets and these (i.e. Dow Jones, NASDAQ, Korea Composite Stock Price Index or KOSPI) are established markets distant from their infancy. If markets always made sense - and cryptocurrency exchanges are a market - then we would all move our money to the obvious winner. It’s just not the way it works. None of it is predictable. Conjecture is as good as it gets and any company or market is one “coingate” away from being finished. Las Vegas is gambling, lottery is gambling, stocks are gambling, and coin is gambling.
12 HOLIDAY REASONS FOR COIN PRICE DROPS
In the last few months alone, here is some of what has happened to moderately explain a 62% drop. The rest I would attest to simple human factoring and hypersensitivity surrounding anything related to Bitcoin. It is winter after all, and if anything sneezes, charts move. It’s only the beginning.
1. Most reasonable investors would agree the price was inflated in December 2017 and natural contractions occur. I am not personally sure how one would determine if coin is inflated, given there is not much basis other than valuation at this juncture.
2. China employs similar techniques to that of blocking the Internet (Facebook, Google) in applying it to cryptocurrency, mining, and starting new initial coin offerings ICO's. They are generally most concerned about how it will affect the yuan.
3. Investors are moving to safer fiat currencies (which are government regulated) due to fear of the cryptocurrency market drops.
4. South Korea’s Ministry of Justice announced it would be banning cryptocurrency trading, which was subsequently partially retracted. But too much damage had been inflicted and skulking back is difficult and painstaking.
5. India's government made comments that were misconstrued as the banning of cryptocurrency, which were also later cleared up. But again, the damages were already incorporated into prices.
6. Facebook announced it would not allow Initial Coin Offering (ICO) or cryptocurrency advertisements on its platform. Yes, that sneeze had an effect.
7. The U.S. Commodities Futures Trading Commission (CFTC) filed a lawsuit against the creators of My Big Coin, alleging a cryptocurrency scam (akin to a Ponzi scheme) that cost investors $6 million. Note that this isn’t the first exchange to “go-under” and lose investor coin assets.
8. Bitfinex, thought to be the largest exchange, was subpoenaed by the U.S. Commodities Futures Trading Commission in part due to lack of overall transparency and suspicion of some other nonsense happening on in the inside.
9. Bitfinex has also had several hacks to its system, losing significant values in the process. These factors led to a large sell-off of virtual currencies.
10. Tether currency has a backend tie to Bitfinex, and investors have speculated that currency manipulation was taking place from the inside in order to purchase Bitcoin.
11. The years of the coin trading Wild West (and Wild East) are quickly coming to a close and regulators are now turning words into actions. That too is in its infancy.
12. Maybe the obvious. Nobody has really figured any of this out yet, the cryptography or the allowance of the currency. This will keep the markets fluctuating for quite some time.
The majority of those involved in the development of cryptocurrency, cryptography, and cipher technologies are some of our brightest technologists and are well-meaning in the advancement of technology, finance, security, and the application of sophisticated algorithmic methods in order to protect consumers in the digital world. If your own coin, my suggestion, pay more attention to the technology, be more than just a casual investor, buckle up, and hang on tight! If there is one thing you can be sure about in life, it’s that nothing stays the same. The days of trading coin as the primary source of income on speculation that it will continue to rise will dissolve as quickly as cotton candy hits your tongue on a summer day at the ballgame. My modest advice is to go “cryptonic.” Follow the crypto, not the currency. In regulated markets, which is what this will end up being, cryptography and its overall application in businesses well beyond currency is where all this is likely going to land. But that will happen in increments of time.
Author: Richard Van Staten
Richard Van Staten is the CEO of Quantam, Chairman of Van Staten & Associates, and Founder of Sugarskull Software and Cypheriot. He is a public speaker and author of “Coined”, a book about Bitcoin, Cryptocurrency, and the Exchanges.