A massive Bitcoin slump Friday saw the cryptocurrency lose almost a third of its value. In fact, at one time on Friday Bitcoin had dropped from $20,000 (£15,000) to under $11,000, but recovered to end at just over $13,000. This compares to a price of only $1,000 at the beginning of 2017.
The cryptocurrency had made large gains during November and December, but from Sunday 17th had dropped back to its value at the beginning of December. This did not come as a surprise to many analysts. What rises at rocket speed can drop just as fast. Bitcoin is very unpredictable and will likely remain so for some time to come. However, it still remains a good investment for those with longer-term ambitions.
Bitcoin Slump – Why Friday?
Why Friday? What happened Friday to result in this particular Bitcoin slump? Volatile or not, there is always a reason for such a sudden drop in the value of any type of currency crypto or not. Some believe the sudden drop to have been sparked by Litecoin founder, Charlie Lee, selling his Bitcoin holdings. Litecoin is another cryptocurrency, and Lee sold his Bitcoins to avoid a conflict of interest.
Coindesk Temporary Shutdown
Others believe that a shutdown of Coindesk (the blockchain and cryptocurrency news site) was a factor. Coindesk shut down for around two hours on Friday. This may have given rise to investor insecurity. As the Bitcoin price began to fall it may have sparked an offloading while the price was still reasonably high.
It is likely that the Bitcoin slump was caused by a combination of factors. The Coindesk and Charlie Lee situation may have been just two. Another reason may have been investors cashing in on their massive gains over the year. As soon as they saw the beginnings of a drop, they likely decided to sell while they still had a reasonable profit
Is Bitcoin an Investment or a Currency?
What this indicates is that Bitcoin is an investment rather than a currency. It also seems that Bitcoin owners tend to be sensitive to fluctuations in cryptocurrency trading and their valuations. However, newer cryptocurrencies have been increasing in value. The Santiment Network Token rose by just over 13% while RaiBlocks increased 16.8% during 1201 – 1800 UTC. Other cryptocurrencies also gained, including Veritseum (+14.3%).
This tends to indicate that cryptocurrencies in general are not falling in value. So can the massive Bitcoin slump Friday be rationalized in terms of investor nervousness in the face of a potential massive loss of value? Also, perhaps, in terms of competing for cryptocurrencies? Possibly and in some minds, even probably!
Bitcoin Slump: Conclusion
It appears that the sudden drop in the value of Bitcoin may be connected to the arrival of other cryptocurrencies in the market. It may also be that Charlie Lee’s Bitcoin offloading, then the temporary shutdown of Coindesk, started a ripple. But that’s only part of the reason as we see it.
The Bitcoin slump likely took place because many investors offloaded their portfolio as the Bitcoin price began to drop. They probably did so in order to cash in on the massive increase in value since January. Perhaps they may be correct, but it is more than likely that the value of this iconic cryptocurrency will claw its way back up again. Those retaining their stakes may well benefit from doing so.
