When cryptocurrency was at its peak, it seemed impossible that a fall would come. However, as history has proved time and time before, this was bound to happen. Still, a recovery might be on its way. But is it worth signing up for a Forex account to trade Bitcoin anymore? Let’s see what’s behind the bubble and we’ll prove it is!
Like Other Bubbles Before It
According to Bloomberg News, the Bitcoin craze comfortably managed to top many of the bubbles that came before it. Not only is it singlehandedly more massive than the dot-com or housing booms ever were, but it also surpassed historical ones such as the Dutch tulip mania of the 1630s. Still, this comparison needs to be taken with a grain of salt due to lack of accurate historical records on prices and other financial aspects.
Robert Shiller, an American economist, Yale University professor and Nobel Prize laureate predicted the bursting of both the dotcom and the housing bubbles. Furthermore, he warned us about the volatility of Bitcoin, comparing it with the tulip craze in the Netherlands. In fact, Shiller claims that the two situations are actually vastly similar.
Just like the Dutch tulips before it, Bitcoin is something that has no real value. However, we have attributed worth to it through greed and obsession, which made it stand out on the market. But just like any bubble before it, this one was bound to burst. And so it has, it seems. At the beginning of 2018, in this very month of January, Bitcoin alarmingly dropped below 10,000 dollars per unit.
What 2018 Brought
The decline of Bitcoin came about just before Christmas in 2017, mere days after advocate and analysts were still optimistic about its future. In the first ten days of December, the world’s most famed cryptocurrency had surpassed the coveted 10,000-dollar threshold and then proceeded to double in value in just a few days.
But as news of a potential ban on the cryptocurrency broke in South Korea, with major power players such as Japan, China and even Germany following suit on prospects of governmental regulation limiting the trading of Bitcoin, investors backed down like never before. The fear that all global governments will quickly follow suit crippled the financial sector indefinitely.
An article on Metro News articulated what the reason behind this was, in the worlds of London-based finance firm Capital Economics. According to their experts, people kept on buying BTC because they believed it will continue its rise in value, not due to a strong advocacy for it to become a new global currency.
Thus, when the drop started, small-time traders fled like the rats off a sinking ship. This is now known as the ‘cryptocurrency bloodbath’, which culminated last month with BTC’s new low of A$9,700 dollars per unit. However, it has recovered slightly and today CoinDesk places it at A$10,991 dollars, which isn’t too bad of a recovery.
So, this leads us to wonder: what will 2018 bring to the world’s most coveted cryptocurrency? A recovery can still happen, but it will take time. Furthermore, if governments choose to just regulate it and not ban it like South Korea plans to, things will settle in time and BTC, as well as other cryptos, might stabilize.
There is a chance that this winter’s cryptocurrency bloodbath might have just been a series of unfortunate events that we will all soon forget. But any good trader knows that governmental interference in the financial sector brings along huge change, which means that BTC might never recover. Only time will tell at this point.