In 12 hours Bitcoin and other (notable) digital currencies saw their price crash as much as 29%. Bitcoin specifically dropped over $6,000 from its all-time high sparking comical headlines from industry commentators and platform marketers as the “digital currency prices Christmas sale.” Experts have been constantly warning that this cryptocurrency price boom is a bubble waiting to burst and as the week before Christmas, there are significant reasons for its specific fluctuation and actually, fairly ugly consequences that go with it.
It sounds obvious but let’s put some facts around the context. 2017 has been a year of the surge in digital currency pricing. In January Bitcoin was at $954 and has peaked just below $20,000.
It’s hard to put a specific percentage on this but on conducting fairly in-depth research well over 85% of cryptocurrency is bought and held in China and increasing so from Korea, Japan and Asia. With the multiples of growth, there will come a time where profit taking comes and the bubble bursts. To keep it simple, you have 10 bitcoins, your wife wants a new kitchen and a good Christmas. You protest that your line of code on a platform she’s never heard of “is the best investment ever” but inevitably you lose. People wanted their money in real form to be utilised, so sold.
Friday’s price slump was said to be caused by the founder of Litecoin selling his stake in the cryptocurrency he founded. He claimed that he couldn’t be seen to be promoting it or commenting on it whilst holding Litecoin as it was “A conflict of interest” which “could appear to benefit him.” True or not, the whole cryptocurrency space felt the tremors and was probably the cause of the initial sell-off. It also adds fuel to the rumour that 1000 people hold 40% of Bitcoins circulating supply and the effect of a huge bulk sell-off from one of the top 10 currencies (by market cap) can influence each other’s price.
This is slightly more dependent on who you speak to and what country. It’s simple. With the introduction of futures to cryptocurrency through CME etc it means Bitcoin can be shorted. It’s not the fact that futures platforms have been introduced, with more and more each day, it’s the fact that institutions are using them. This is subject to accounting debate but with end of year targets, profit taking and possible tax implications for end of year depending on when companies have to declare their yearly earning it may have been advantageous to sell positions, take the gains and be creative with the tax accounting.
The digital currency prices cool-off and bearish fears are also a result of negative momentum surrounding security and legitimacy of the new asset class. Various cryptocurrency exchanges have also faced a number of hacks in recent months, including one that took down the Youbit exchange in South Korea last Tuesday. They have now filed for bankruptcy officially. Initial investigations suspect the attack may have been carried out by North Korea. Mid-December saw almost $64bn in Bitcoin stolen by hackers who broke into the NiceHash marketplace in Slovenia. That followed a $31m theft of rival cryptocurrency tether, last month. PlexCoin was halted by the SEC on the charges that it was an ICO scam, not uncommon outside the top 50.
On the regulatory side, Tel Aviv stock exchange took action to ban ICO’s and Bitcoin firms from the exchange this month. The Israeli regulator took the decision in the wake of the SEC in America, Bank of England and FCA all warning that 2018 could be the year of regulation.
None of the above mentioned stand out to be particularly surprising just more time of year related. 2018 will see a time of change again with more lessons learned paired with mainstream adoption. As I write on 27th December, Ripple has become the 3rd largest cryptocurrency by market cap having been listed on previously 6 exchanges to now well over 50. Its being finally rewarded and respected for its inherent utility and application and was the only cryptocurrency in green for most of December.
This is a prime example of how technology and fundamentals with drive the investments and price of digital currency coins with a more intelligent and considered strategy to calculate digital coin price and value. Over the 2017 Christmas period, the bulk of digital currency prices have been moving with each other. 1.00% drops in an hour, 2% gains the next and mass crashes of 20% over 24hours. They say “what goes up, must come down” just how far down is the question million Bitcoin question.