Examining the Current Bitcoin Decline

The price change for Bitcoin has been in the red for the most part of 2018. Granted that the year is still only a few weeks old, it is still a worrying trend for many cryptocurrency investors. Not only has the price of Bitcoin been declining since it hit the zenith at $19,800 in mid-December, the market as a whole has been experiencing a great deal of price reduction. At the time of writing this article, the price of Bitcoin is well below the $10,000 mark, currently sitting at $8,709 which represents a 4 percent decline within the last 24 hours.

The Extent of the Decline

At the start of last year, the price of Bitcoin was below the $1,000 mark but then during the year, it experienced unprecedented growth. This culminated in the cryptocurrency almost crossing the $20,000 mark. Since reaching those lofty heights, Bitcoin has been in something akin to a freefall. There have been intermittent signs of recovery but they haven’t lasted more than a 24-hour period. Presently, the price of Bitcoin is at the lowest level it has been since November last year. There are signs that point to a continuation of this downward trend as the market seems to be experiencing a bit of a crisis.

$80 Billion Value Decline

The fall in Bitcoin price throughout since the beginning of the year has resulted in an $80 billion decline in Bitcoin market cap. This represents the biggest decline in the history of the cryptocurrency. The current Bitcoin market cap stands at about $146 billion. The almost daily decline in Bitcoin, as well as other cryptos, has made the total Bitcoin market cap to fall from about $600 billion to about $417 billion. The top 10 cryptocurrencies have all experienced periodic declines throughout this period as well.

The Bitcoin Bubble

Proponents of the Bitcoin bubble argument will point to this decline as a testament to the validity of their argument. Many stakeholders in the mainstream financial scene have on numerous occasions referred to Bitcoin and the entire crypto market as being one giant bubble. The excessive volatility, high speculation, and lack of regulatory oversight have convinced the majority of mainstream finance to conclude that the Bitcoin price model is unsustainable. Seasoned investors in the crypto space will say now is the right time to get into the market. For those who already hold Bitcoins, the overwhelming advice would be to HODL.

Reasons Behind the Decline

Like almost every other question, it is difficult to get a straight answer to why the price of Bitcoin is on such a massive decline. The cryptocurrency market always seems to have a lot of layers to it. A clear picture can only be gleaned when as many facts as possible are considered to some degree of detail. Depending on who you ask, there a number of reasons that can be attributed to as being the cause of the current Bitcoin slump. The following is a brief look at some of these reasons.

• Bitfinex, Tether Investigation

Bitfinex, one of the largest crypto exchange platform is currently under investigation by the United States Commodity Futures Trading Commission (CFTC). The inquiry by the CFTC has been ongoing since December last year. The CFTC issued a subpoena for both Bitfinex and Tether. The reason for the investigation comes from concerns over the Tether cryptocurrency which is a cryptocoin whose value is pegged to the dollar. 1 Tether is supposed to have a value of $1. It allows crypto trading operations to take advantage of the stability of the USD.

In order for such a model to work, then the crypto trading platform must have enough Tether reserves to cover the full value of their transactions. However, concerns have been raised that Tether does not have enough money in its accounts to cover the value of its transactions. Bitfinex and Tether have the same CEO and the former has been a big proponent of the latter leading to concerns about the 2 companies. Word of such a high-profile investigation is sure to have an impact on Bitcoin prices.

• Tougher Government Regulations

Since the start of the year, there have been reports of imminent cryptocurrency regulations coming out of many countries. It seems as if the period of ambivalence with regard to Bitcoin and the crypto market is at an end. After the ICO and crypto trading ban by China in September of last year, other countries have started to take drastic actions against the cryptocurrency market.

China followed up last year’s ban by outlawing over-the-counter exchange platforms and foreign crypto trading platforms. This essentially cut off the last remaining access to the crypto market that many Chinese citizens had. The news out of South Korea has also been one of imminent regulations. Reports of an impending ban were soon dismissed but the government has issued strict KYC regulations for crypto trading platforms in the country. In Europe, there are moves being by the EU Parliament, the ECB as well as several countries within the region to regulate the crypto market.

Perhaps one of the biggest news was the comments made on Thursday by Arun Jaitley, the Indian Minister of Finance. Several crypto news outlets interpreted his statements to mean an imminent crackdown on the Indian crypto market. Uncertainty around the meaning and significance of the Minister’s speech caused a great deal of panic within the market and the price of Bitcoin fell below $10,000.

• Other Reasons

There have been recent reports that Facebook will soon ban ICO adverts on the social media platform. This comes as Facebook is striving hard to sanitize the platform and many of these ICO campaigns have proven to be elaborate Ponzi schemes. The increase in the number and regularity of crypto hacks is beginning to force some investors to shy away from the market. The associated bad press is also casting Bitcoin in a bad light.

On a final note, it is important to point out that the fact that all of these things are happening in and around the same time is a major reason for the sharp decline. It has been a tumultuous year for not just only Bitcoin BUT for the crypto market in general as well. Analysts, investors, monitors, and everyone else is surely waiting expectantly to see what happens next.

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