Bitcoin Briefly Drops Below $6,000 as Cryptocurrency Market Tumbles
Despite the unfettered growth of bitcoin in 2017, by the end of the year, cracks in the figurative bubble began to form, after a landmark climb had begun in November. The decline of bitcoin seems to be continuing unabated, since mid-December, this week dipping below $6,000, a figure which financial analysts have not reported since November.
Earlier today numbers dropped below the 6k line to $5,981, which is a 16% fall, which represents a total loss of over two-thirds of its peak value of $20,000 seen in the second week of December. Bitcoin has made a slight rebound, but at the time of writing this, is now trading at $6,146. Bitcoin took most of the heat, it seems, although some of its less-performing alternatives like Ether, Litecoin, and Ripple have experienced a loss of roughly 6 percent.
Beyond the effects of regulation in South Korea, China and Japan, India has also begun to express a strong desire to stifle to suppress bitcoin. Indian Finance Minister Arun Jaitley made a strong anti-cryptocurrency statement a few days before, saying that the government of India “does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system,” adding about plans to impose rules, “We are discouraging people from using it now...[t]here is a government committee that’s looking into it right now and they will announce their decisions and next steps after they are done.”
“It’s not obvious what a circuit breaker to this weakness will be, or might emerge from. This could end up a full round trip back into the $US1850 region.”
CFD chief market strategist Greg McKenna was unrestrained in his reaction to bitcoin’s decline earlier today, implying that future drops are inevitable: “Increasingly this is looking like a falling knife no one wants to catch,” adding cautiously, “And why would you right now?”
Phrases like “the bitcoin bubble has burst”, while trend worthy, don’t seem to capture the full extent of the issue. The only information that is certain, besides the numbers reflected on the market, is the enormous impact that the government’s position on digital currencies can have. The message to investors is clear: play ball. Also looking at the big picture, we should also content ourselves with the knowledge that bitcoin is performing extraordinarily well compared to one year ago, when it was trading at close to $1,000.
Beyond the onslaught of hacks to various platforms, charges of speculation in the East Asian market, and a series of tough and restrictive regulatory measures from various governments, the trading tide of bitcoin investors continues, largely motivated by the desire to exercise a level of financial trading that is unparalleled in modern history. In the final analysis, however, are their reactions to bitcoin’s steady 6-week decline an act of defiance, blind loyalty, or faith in the financial promise it holds for them? Only time will tell. We will continue to monitor the developments of the cryptocurrency closely in the next few weeks.