Bitcoin has faced two major slumps in its short lifespan since 2009, one in 2014 and the most recent one in 2018. Back in 2014, the price of Bitcoin (BTC) rose to levels above $1000 then dropped by 80% as the massive Mt. Gox scandal took center stage in the cryptocurrency world. The trend has been repeated this year after the price of BTC rose above $20,000 in early January and fell to below $5,000 USD, representing an 80% loss for investors. With the price of BTC taking years to recover in 2014, will the price in 2018 face the same fate? One experienced cryptocurrency investor, Willy Woo thinks the dynamics have changed and recovery of BTC price will be much faster in 2018 than seen 4 years ago.
Price Recovery: 2014 Vs 2018
As explained before, the worst correction BTC’s price has faced is the slump in 2014. The long period of price recovery from 2014 to 2017 has led to cryptocurrency experts expecting the same to happen this year as historical evidence shows the tendency of BTC’s price taking a year or two to recover. However, according to Mr. Woo, the environment preceding the 2 014 slump [the Mt.Gox hack] and the current normal market slump are different hence he expects the price recovery to be different than what has been predicted.
Story Of 2014: The Mt. Gox incident
In 2014, Mt. Gox suffered the largest hack on a cryptocurrency exchange at the time that saw millions of dollars in BTC stolen from the exchange. The now defunct exchange was at the time handling the largest volumes of BTC traded daily across the globe. The exchange handled over 90% of the total trades on the pioneer currency while their internal management systems extremely substandard and their security systems practically non-existence.
“Another view on a long recovery. Worth bearing in mind 2014-2015 was detoxing from a Mt. Gox collapse; traded 90% of world volume. Plus 1/8 of all BTC stolen plus Willybot pumping prices. Systemically, Bitcoin 2018 is much healthier than Bitcoin 2014,” Woo said.
This in turn caused a huge hack that saw over $500 million worth of cryptocurrencies stolen from the exchange that subsequently ran the exchange bankrupt and investors lost their funds. With the largest exchange hacked, the overall sentiments in the market turned soar with BTC’s price taking over 2 years to recover to previous heights in 2017.
Story Of 2018: Institutional Investment Is Key
Compared to 2014’s dramatic year, 2018 started off with the price of Bitcoin flying high at $18,000 USD across most crypto exchanges. The market quickly turned bearish as the price reversed to below $6,000 within a month. This however was caused by the overall market factors according to Mr. Woo with the off-charts activities seen on the crypto arena signaling a bullish reversal on its way,
The year has been filled with an increase in the overall interest in institutional investors having a piece in the industry. The increasing demand by institutions to integrate blockchain technology and use cryptocurrencies as a payment option and emerging asset class in 2018 continues to see a growing interest by cryptocurrency companies such as Coinbase, TokenPay and Gemini pushing investors into Bitcoin.
Some of the big institutions showing much interest in the technology include JP Morgan, New York Stock Exchange (NYSE), Microsoft and Starbucks. The latter three launched a joint initiative, Bakkt, which aims at a stable, secure, and established framework in the blockchain space to bolster the adoption of cryptocurrencies. The initiative will use a proven framework that underpins exchanges, including a consistent regulatory construct, transparent, efficient price discovery, and an institutional quality pre- and post-trade infrastructure to achieve its goals.
One of the first initiatives Bakkt has led in August is assisting major cryptocurrency exchanges in finding a trusted price formation of digital assets, which experts believe will drastically increase the probability of an Bitcoin ETF approval.
A Bullish Reversal Is In Sight
With the price of BTC trading around the $6,000 USD mark in the last few months, the recent boost in price above the $6,500 mark shows a bull reversal is in place. The resistance level at $6,500 has been broken and the volatility of BTC price is at a 14 month low in August that signals mid-term recoveries. The price remains stable for a couple of months before the price soaring as seen in 2017.
All these factors considered, we can clearly see the difference in the two strong bearish runs witnessed in 2014 and 2018. The continuing positives in the blockchain industry will see a major reversal in price that may well see Bitcoin’s price surpass its all-time high. Hold on to you seats, BTC is on to rally upwards.