The market is showing a substantial drop in the value of the bitcoin—a massive loss of over 20% of its value—in the last 24 hours, and financial analysts, as well as traders, are scrambling to make sense of the sudden change.
The volatility of the cryptocurrency is raising fresh concerns, as many believed that this year the bitcoin had more or less begun to perform steadily, regaining its footing in the market after a previous rough 2-year period, particularly in the Asian market. The value drooped to as low as $9,000 on Thursday, and this after reporting a record high of $11,395 just the day before. Though the bitcoin did rebound a bit, rising to as much as $9,400 in the Bitstamp exchange based on Luxembourg, the numbers are still very worrying.
As the power of the cryptocurrency is largely driven by independent trading and mining efforts, the true test here will be how the investors, as opposed to the financial analysts, are responding to this devastating loss. Investors have been blaming power outages and slow trading for the negative outcome.
Still, some insiders believe that the drop was not accidental, and in fact may have been motivated by efforts to slow the momentum of the cryptocurrency: “Naturally a few of the early bitcoin traders are taking some profits off the table,” shared Charles Hayter, founder of CryptoCompare.com, adding optimistically, “Volatility is in the market at the moment and that means both positive and negative moves.”
If Hayter's words hold true, it means that the bitcoin is a bigger threat to the traditional currency market than we could have previously imagined. Like it or not, there is no stopping this juggernaut we call the bitcoin. Even in the midst of the losses in the past twenty-four hours, the responses have been largely optimistic, as many investors and miners are preferring to focus on the incredible rallying power of the cryptocurrency.
In the past few months, the bitcoin has entered mainstream investment circles more than ever and set perhaps its most critical record: it has gained its greatest level of public awareness. Google searches for bitcoin have been through the roof this month. Yet another sign is that the voices coming from more traditional moneylending institutions are also beginning to soften towards the bitcoin, an indication that an eventual, though delayed, kind of support will be given. Goldman Sachs Group CEO Lloyd Blankfein, one of the strongest voices of opposition in the past, said recently of the cryptocurrency:
“Something that moves up and down 20 percent in a day doesn’t feel like a currency, doesn’t feel like a store of value,” Blankfein said Thursday during an interview on Bloomberg Television, adding, however, “If it works out—and it gets more established, and it trades more like a store of value, and it doesn’t move up and down 20 percent, and there is liquidity to it—we’ll get to it.”
This bump in the road that the bitcoin has experienced this week is normal, and at same time legitimizing its status as a viable currency: “Every three weeks it goes up, people take profits and then it goes down but money is still coming in so it will keep going up,” said David Drake, chairman and founder at LDJ Capital, a multi-family office which invests in bitcoin.