Bitcoin skeptics must be pleased as the value of the cryptocurrency drops below $13,000 USD down about 30% from its near $20,000 value at the start of the week. “Keep in mind that bitcoin has gone up a lot this year, so a correction is always likely,” said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers in Sydney. Bitcoins massive price rise in the last few months has brought legitimacy to cryptocurrencies and also paved the way for rival currencies to enter the market. “A lot of the capital is flowing from bitcoin into alternative coins. You’ve seen companies like Verge and Ripple, which are over 400% in the last week,” Chanel explained.
Bitcoin rivals surge ahead
Verge and Ripple are among a growing group of cryptocurrencies that both mimic and compete with high-profile bitcoin. While some recent investors in bitcoin might be surprised and dismayed at its sudden loss in value, the mostly unregulated currency has a history of sharp falls and rises. “Trading in bitcoin is akin to gambling, so its movements don’t follow logical patterns. Unlike equities and bonds, it is not possible to calculate expected returns on bitcoin, so buying it becomes a gamble rather than an investment,” said Takashi Hiroki, chief strategist at Monex Securities in Tokyo.
In November the currency fell to almost 30% in four days from $7,888 to $5,555 and again in September, it suffered a massive drop of 40% from $4,979 to $2,972.
One rival currency that has really benefited from the increased exposure of cryptocurrencies thanks to bitcoin is Ethereum. The lesser-known currency broke through the $500 dollar mark on December 12 and reached a peak of over $850 USD before leveling out to currently sit at about $660 USD. The even smaller profile currency Ripple or XRP was also trading strongly ripping through the $1 value on Thursday and staying around $1.10. Ripple has a market value of $42 billion which makes it the third-largest crypto-currency behind bitcoin and Ethereum. Despite all cryptocurrencies being very volatile, so far bitcoin has proven to be fairly resilient, being able to bounce back from previous dips.
Investors remain confident
Only time will tell if the same will happen in this instance. Critics of cryptocurrencies may be happy to be proven right for the moment. But the many recent investors in bitcoin and other cryptocurrencies will be on the edge of their seats waiting to see the results of another day's rise and fall. Despite the many official warnings from investment professionals warning people about the dangers of investing in cryptocurrencies, many people have been attracted by the coins sudden growth and accessibility. There have been some reports that people are taking on significant loans through credit cards and mortgages to fund their investments.