An Attempt to Understand the Bitcoin Bubble Burst: A Beautiful BTC Breakdown
Cointelegraph released an interesting analysis of the bitcoin bubble burst. This is a summary of the article’s findings.
Approximately sixteen months ago, bitcoin peaked at $19,100. Now, its value is around $5,000. With the benefit of foresight, it may be time to analyze what drove the rapid decline in bitcoin’s price and whether its value has reached bottom.
In addition, altcoins have turned out to be a speculative bubble as well and there may a number of variables influence it. One particular altcoin that deserves attention is Ethereum. It is a digital currency that has been designated as second concerning capitalization and it has led to the increase of ICOs.
Although ICOs have led to an increase in new platforms, the downside is that many platforms have determined to be scams. For example, according to a separate Cointelegraph article, a new study determined that 80 percent of ICOs conducted in 2017 were scams.
The next question that arises in the article is what else drove the bitcoin decline. When it comes to bitcoin, its value is determined by supply and demand on individual exchanges, which are illiquid prices. Prices on exchanges may also vary from one to the other due to structural limits and settlement platform. Therefore, determining what the fair value could be is a challenge.
The traders on the markets use technical analysis tools in an attempt to interpret movement.
The issuance of new tether on exchanges may also be another influencing factor. According to the Cointelegraph article, if one where to review the data in the original article, there is a correlation between bitcoin’s behavior and the issuing of new tether. It could be the case that Bitfinex artificially enhanced a manic buying phase of digital currencies by issuing more tether. Even though things seemed to go well, it was by the end of 2018 that things began to change.
A shift in computing power reduced support for bitcoin and in turn, may have led to a decrease in the price of digital assets. As a result, miners began operating at a loss and the computing power of the bitcoin network took a dive.
Although mining started to improve in 2019, which can be seen with the recovery of network has rate, the improvement has been slow. That is, until the beginning of April 2019, in which the value of bitcoin increased by almost $1,000 to surpass $5,000. The hope is that 2019 will be a new era for digital currencies.
Even though investors may face a slow recovery when it comes to their digital assets, there is hope in the occurrence that interest is still growing. Moreover, there is also the hope that regulators will come out with more guidance that reduces levels of uncertainty and ultimately creates a more stable and predictable system.