By David Drake
The world’s leading cryptocurrency, Bitcoin, has been on a downhill trend with its price dipping to below $4000 last month. This kind of price drop was last seen in August 2017, yet it is the lowest Bitcoin has ever gotten and raises questions on whether this could be the end of the cryptocurrency. Optimists, however, note that the last time Bitcoin price sunk this low, they dramatically recovered to the highest price of $20,000 in December 2017.
Why the Price Dip
The most likely reason for the price dip is the ongoing differences in Bitcoin Cash fork which led to two factions, the Bitcoin cash and Bitcoin cash SV. As a result of the fork, these factions have been dumping Bitcoins, leading to an increase in supply and pushing Bitcoin prices down. Also, the tough regulations provided by the Securities and Exchange Commission (SEC) have contributed to Bitcoin’s price downward trend.
In addition, the delay in the launch of futures by Bakkt contributed to the decline as a whole. The deferment was brought about by increased interest from institutional investors and Bakkt as they look into the future role of cryptocurrencies. The launch of futures is likely to lead to a huge inflow of money into the crypto market which remains to be seen in January.
But for Joseph Oreste, founder of Qupon, the slow rate of cryptocurrency adoption and the fact that little consolidation of distributed ledger technology has taken place could have contributed to the recent market crash.
He says, “There is tremendous need for consolidation in the distributed ledger community. Some clear winners need to be chosen by the industry so that efforts can be focused to grow and improve a select group of platforms. Adoption is another factor. Institutional money will drive consumer adoption. Many of these distributed ledger technologies are a bit immature (transaction processing and scalability) at the moment to warrant the big support and adoption by institutional investors.”
The crypto market is working to find a way of reversing the trend, and more investors are now looking to sell their digital assets rather than buy. This has resulted in various cryptocurrencies dropping to double the market capitalization loss in the past weeks. It is predicted that Bitcoin prices will dip even further, while other cryptocurrencies such as Ripple and EOS will be worse off since their trade volumes are already low.
Downward Trend Outcome
The effect of the crypto price drop has had tremendous effect on the virtual market with the crypto miners facing huge losses and equalling revenues against their initial costs.
To some, this price dip was expected and shouldn’t change the overall outlook of virtual assets. The total value of the market is still high and the possibility of Bitcoin coming to an end is still far off. These are not so positive news for miners and suppliers of crypto equipment as their sales are low.
Many Bitcoin miners are no longer in operation due to the enormous losses incurred as a result of falling prices. Also, mining equipment is being sold off or being utilized in other areas. It is expected that once the price improves the miners will return.
It may take a while to see the full impact of the plummeting Bitcoin prices and the debate whether this is the end of the road for cryptocurrencies or not ranges on.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.