Why Bitcoin is falling?
Bitcoin is undergoing a roller coaster ride falling from $19,870 on December 17
to $12,000 this morning. Crypto currencies and Bitcoin caught the attention of
investors in 2017 and they became totally infatuated with it. In the beginning of
2017 Bitcoin started at $963.38 and ended at $13,850.40 with a gain of 1,338%.
It nearly reached $20,000 on December 17. This caused Bitcoin and other crypto
currencies getting huge media exposure and also enabled the creation of new
Bitcoin dropped 19 percent to a low of $10,969.15 on Tuesday since early
December according to coin desk. As per coin desk bitcoin price index tracks
prices from crypto currency exchanges Bitstamp, Coinbase, itBit and Bitfinex.
As per crypto compare trading in South Korea accounted for about 3.5 percent of
bitcoin trading volume. Bitcoin trading is highest as per U.S dollar. It is about
Crypto currencies started well this year but the reports of South Korean
regulators that cracking down on exchanges shook the entire digital currency
Reasons behind the fall of Bitcoin
Regulators could have the biggest impact on Bitcoin and CC prices. Multiple
countries have either implemented some regulations or discussed plan to limit
them. If the regulations have become a burden they could negatively impact the
usage and also the price of CCs.
Already implementing some regulations, South Korea is also considering
additional ones. Few days ago South Korea announced that CC traders might be
fined if they do not convert from virtual account from where they trade
anonymously to real name account.
One symptom on how many regulations could impact a CCs price is when South
Korea’s ministry of Justice issued a premature statement on banning CC trading.
Just after the statement was corrected the price of EOS, a popular CC in South
Korea jumped 40%.
Last month the SEC Chairman released a statement on “ Crypto currencies and
Initial Coin offerings”. It laid out where the market is currently, what the
investors could ask and that the SEC is interested in this new technology.
There is actually no value to it
Bitcoin or CCs don’t generate any revenue or profit in the traditional sense. As it
doesn’t generate any profit so it cannot be valued in the way most assets are.
Bitcoin actually resides in computer. If enough uses aren’t developed for them
their demand could decrease.
Volatility creates nervousness
Bitcoin is much volatile than any other asset. This is good for traders. But for
long-term investor it is a headache. If this continues the demand from a wide
range of investors are reduced.
Bad for leverage
If Bitcoin’s price is too much higher it could force contractors to liquidate, thus
putting pressure on Bitcoin price.
ICOs (Initial Coin Offerings)
With the rise of Bitcoin price there has been an increase of ICOs or Initial Coin
offerings. While there aren’t any assets behind Bitcoin or other well-known
crypto currencies a huge percentage of the new ICOs really could be all fluff. If
too many ICOs are dishonest the investor demand for the CCs will be affected.
Can be easily associated with any sort of crime
Criminals and money launders use Bitcoin and Crypto currencies. So government
is concerned about that. Having the facility to remain anonymous a Bitcoin user
can work from any part of the world. This could lead to an increase in demand
for them. If government were able to find a way to regulate them due to the
above concerns then demands would be lessened.
Comes down to trust
Any global financial system is based on trust between individuals, companies
and governments. We trust the computer bits that show the number of shares of
the company we own, the amount of cash we have at the bank, the credit card
charges and payment for the stuff we buy. To a large degree these are computer
bits stored at various location. Bitcoin and CCs are similar in this respect.