Bitcoin, one of the first and the most popular cryptocurrencies, currently has no direct competitor. This is because it is way ahead of all others in terms of value. However, over the last few years, this market has witnessed an increasing number of cryptocurrencies, and perhaps many more are in the offing.
With such an intense competition among players, technical and functional innovation in terms of increased security, and enhanced features of the cryptocurrency platforms coming out, it is essential that the old and the initial ones need to be upgraded; else, they may become obsolete. And that is the rule of nature.
Is this perhaps what has happened with Bitcoin? Why is Bitcoin crashing? Let’s analyze the reasons. Apart from the point mentioned above, there are various internal and external factors that may be playing a role in the BTC crash. Some of the internal factors could be transaction fees, scalability, Bitcoin infrastructure issues, and more.
Bitcoin value may also have taken a beating due to the recent suspicions of alleged insider trading, high transaction fees, too many variants, exchange shutdowns, and possible internal conflicts.
Internal conflicts regarding infrastructure issues and high transaction fees almost became public when Roger Ver of Bitcoin.com said on CNBC that users “should not hold Bitcoin and they can be hacked”. (Source: ‘Bitcoin Jesus’ says investors should be ready in case bitcoin falls out of favor, CNBC, December 22,2017) So, infighting may have been one of the reasons for the BTC crash.
An important question to be considered is if this crash is just a temporary phase or is it the bubble that has burst, like some cryptocurrency skeptics say. We think, this crash is temporary and it may recover sooner or later. Highs and lows are bound to be there in such markets- whether it is stocks or cryptocurrency. Plus, Bitcoin has witnessed such lows earlier as well and has bounced back equally just as much.
According to William Derringer, who has researched financial bubbles, “If we knew with absolute certainty that Bitcoin’s was a bubble, it would have already popped.” (Source: If the bitcoin bubble bursts, this is what will happen next, Wired, December 22, 2017) Some skeptics and perhaps the media have been inflating the bubble, making it larger each day. Had that been real, it would have burst by now.
After hovering around $10,000 in the first week of December, it peaked to $17,000 on December 8. Over the next two days it fell to $13,000, but again rose to $17,000 on December 11. In fact, on December 17, it crossed $19,000. But after that, the value has mostly fallen and is now around $13,000-$14000.
It would be good news for Bitcoin holders if and when BTC recovers. However, one thing is certain- laying all your eggs in one basket may not be the best way to build wealth. Investment experts advise to build a diversified portfolio of investments, for a reason.
There’s nothing wrong in becoming a millionaire, but if you plan to do that only through Bitcoin or only one particular cryptocurrency, you are perhaps at an increased risk of becoming bankrupt. So, while you earn your bitcoins, make sure you have real money and other cryptocurrency investments too. The exception here is Bicoin users who are already millionaires, because they may not be affected at all.
Going by the past patterns of rise and fall of Bitcoin, we are almost sure, it would be back with a bang. By and large, we are positive about Bitcoin, and for as long as it serves people to make money, it will receive the required support of its users for sure.