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Dec 22, 2017
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Within five days since December 17, bitcoin price has plunged from an all-time high of nearly $20,000 to almost below $13,000 as of this writing.
The more than 25% dip in just less than a week has left both investors and analysts looking for answers. Besides, the steady downward trend has led to a dwindling demand of the world’s most popular digital currency, as more suppliers dominate the market, fearing for a further dip.
However, Bitcoin fanatics are hopeful that the slight fall in the price is no cause for alarm. If history is anything to go by, the cryptocurrency has encountered similar dips in the past, only to bounce back with a boom. To shed more light on the current decline, analysts recommend having a close look at the overview of some of the outstanding crashes in the history of Bitcoin.
More than 25 percent drop
From an all-time high on December 17, Bitcoin took a downward trend that sliced more than a quarter of its market value. As of this writing, the digital currency looms toward below the $13,000-mark, should the price decline continue. The recent price weakness was experienced on December 10, but the right now the digital currency is well past that value. Several factors might have come into play, favoring the decline. Bankrupt exchangers, Mempool congestion, higher transaction fees, internal politics, and others may be compelling weaker hands to sell their investments.
History has it all
In the early days, bitcoin owners achieved their expectations and two years later the digital currency achieved equivalence with the US dollar. At the time, that was a remarkable milestone. Then Bitcoin broke out, racing to $19 in summer 2011. Unfortunately, the gain was followed by the implosion of the ill-fated Japanese exchange, Mt. Gox. What followed was a three-dollar dip just minutes after the news broke in.
That was not all. For a week in June 2011, the price of bitcoin plunged 68 percent after it attained a high of $32. That sent the digital currency into a bearish race and by November the same year, it only managed to scrape a mere two dollars. For more than a year, the digital asset could not close the 30-dollar gap.
Challenges in 2012 onwards
Come 2012 and bitcoin began with a creepy 36% crash. However, by mid-August the same year, the price ascended to double digits. Interestingly, the price dropped by more than 50% to a single digit by August 19, 2012.
In 2013, the cryptocurrency bounced back and continued on an upward trend until December, when a series of challenges began. Another exchange exited the scene and China issued stern warnings that affected the price of Bitcoin, leaving more than half, gutted.
By April 2014, Bitcoin had crashed a few times, a major 61 percent correction occurred on April 10, 2014. However, the cryptocurrency bore the prevailing market challenges and soldiered on. In early December 2014, Bitcoin experienced a sudden overnight collapse, from $1,200 to less than $600.
The year was uniquely miserable for the cryptocurrency, with several contributing factors. Silk Road shutdown, rising scaling debate, looming DDoS attacks, and the disappearance of Mt. Gox all contributed to the crashes. In fact, many players still believe that the system is still trying to pick up from the perils of 2014, in more ways than just the drop in price.
Both 2015 and 2016 saw fewer crashes and more of bitcoin price growth. However, summer 2016 saw bitcoin price fall by nearly half, following Bitstamp hacking.
Fast forward to 2017, the Year of Bitcoin witnessed a 30-percent price slump. This followed China’s announcement that it was considering greater restrictions, which, true to their word, they did. With a few market challenges here and there, 2017 was not so crash-laden.
With the developments for nearly a decade, we can suggest that Bitcoin has crashed and died many times: even with the challenges of price crash and hucksters out to make quick and easy money, many more people still believe in Bitcoin and will do everything to build it every day. As long as Bitcoin continues to have value, it will receive the support it deserves.
Factors behind the decline
Analysts and experts provide two possible explanations for the recent price dip and the alteration of bitcoin. Some analysts attribute the plunge to the skyrocketing growth of bitcoin price in November 2017.
In November alone, Bitcoin price improved from $8,000 to slightly more than $19,000. The latest correction notwithstanding, Bitcoin has recorded a 91.37% improvement from November 22, according to Coinbase data.
According to Dan Morehead, CEO of Pantera Capital, there is a possibility of a 50-percent fall in the price of Bitcoin, in the next few weeks. However, Morehead emphasized that a 50% dip would only push the price of bitcoin one month behind.
In the past four years, Pantera Capital, along with its bitcoin hedge fund, witnessed a 25,004 percent return. This was nearly six times what billionaire investors George Soros and Jim Rogers amassed in the legendary Quantum Fund.
For many years, the global finance market praised Rogers and Soros as legendary investors. The duo recorded a 4,600 percent return in ten years. With its Bitcoin hedge fund, Pantera Capital recorded five times more in just four years.
Therefore, even as Bitcoin expert Adam Back observed, the recent dip in bitcoin’s value could just be a major price correction following the recent bull run.
Similarly, Litecoin founder Charlie Lee emphasized recently that a bull run by Litecoin is likely to be followed by a bear cycle. He noted that a sudden decline in the price of a major cryptocurrency such as Bitcoin could only affect short-term goals.
According to Lee, “Every crypto bull run I’ve seen has been followed by a bear cycle. The market needs time to consolidate. That’s just my experience from seven years of watching this space. How low and how long it will be is TBD. People need to be aware of this possibility and invest responsibly.”
High fees factor
On December 21, Erik Voorhees, CEO of ShapeShift disclosed that bitcoin transaction fees were averagely higher than bank wire fees. He noted that in the past 12 months, the charges rose to $40 per bitcoin transaction, higher than what most banks charge for a wire transfer.
On his twitter handle, Voorhees expressed a major concern: “Average bitcoin transaction fees over the past year. Now averaging $40 per transaction. Higher than most bank wires.”
Image from Google
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