Crackdowns from global regulators, system failures and security breaches in the past few months has decreased the value of bitcoin, discouraging once-enthusiastic cryptocurrency investors to withdraw their money from the digital currency market, incurring significant losses along the way.
When the Bitcoin value recovered by 33 per cent in April, many cryptocurrency investors decided to sell off instead of holding on to hopes for continuous growth. Since December 2017, when the bitcoin was valued at $20,000, cryptocurrencies have crashed by 70% and the sustained bear market has compelled impatient investors to pull out.
On the other hand, crypto enthusiasts are continuously urging each other to ‘hodl’ – a popular acronym derived from a frenzied typo for ‘hold’ which now means ‘hold on for dear life’. But will bitcoin prices recover from the recent slump which lowered its value below $6,000?
As of Friday, 4:27 p.m. ET, Bitcoin’s value plummeted to $5,799.62 – the lowest it has been since November, 2017. The first and the biggest digital currency decreased by 57% in value this year after soaring above 1,100% in 2017. Experts believe that the sudden slump was triggered by the news of global regulators cracking down on cryptocurrency exchanges for fraudulent activities.
Just last month, Japan’s financial regulator order exchanges to tighten security control to prevent money laundering. Another factor that has weighed on bitcoin prices in a hike in security breaches that have resulted in millions of dollars’ worth of bitcoins stolen from cryptocurrency exchanges across the globe. In January, two of the biggest exchanges in South Korea, Coinrail and Bithumb, announced major security breaches which resulted in over $70 million in losses.
Probable Cause behind Decreasing Value
BKCM CEO Brian Kelly claims that the frenzied trading on Friday was amplified by the expiration of CME futures contracts; although resentful investors say that their expectations from the market have not been met for the past several months which is why they have decided to pull out. Kelly assures that apart from the security breaches and regulatory crackdowns, most of the news about cryptocurrency has been positive. Among the positive headlines, Kelly cited U.S. SEC’s announcement that ethereum does not classify as a security.
Analyst Mathew Newton, who works for eToro, said that observations from past trends show that bitcoin value usually decreases close to futures settlement date. Newton also pointed out the lack of spark in cryptocurrency markets which drove its prices in September last year.
The demand for digital currency is low whereas there are way too many sellers willing to trade off their coins. With such low demand, prices are bound to suffer. To breathe some life into the market, Newton suggests bringing some sort of a technological or regulatory development which can get buyers’ attention once again.
But bitcoin isn’t the only digital currency whose prices have taken a serious hit recently. Other cryptocurrencies like Ethereum and Litecoin also decreased by 14% each in value last week. According to CoinMarketCap.com, the total market cap for cryptocurrencies has decreased by 61% in 2018.
Optimistic About the Future
Despite the recent market downfall, Arthur Hayes, a Bitcoin bull, is optimistic about the currency’s future. Hayes, who is the CEO and cofounder of BitMEX predicts that Bitcoin’s prices could reach $50,000 by the end of 2018. He told Fast Money on Friday that the digital currency topped $20,000 last year and it can certainly do it again with a few corrective actions. While the currency’ value could dip down to $3,000 during low demand, a single positive regulatory decision or technological change to improve security could see the prices climbing to even $50,000 by the end of this year, Hayes said.
Hayes points out that the volatility of bitcoin plays a significant role in the currency’s fluctuating prices, which can increase the possibility of making large gains. This is also one of the reasons why investors are attracted to it. He says that cryptocurrency has soared in popularity since last year and with so many investors eyeing the market, it will only be a matter of time before the bear market transforms into an aggressive bull market.