Why is the price of Bitcoin decreasing?

Why is the price of Bitcoin decreasing?

Bitcoin always operates as a roller coaster in terms of its price. The value of Bitcoin at the beginning of 2017 was $963.38 and the price hiked to $19,870.62 at the mid of December. This made the cryptocurrency market look significantly impressive. Additionally, the surge in Bitcoin’s value received a huge media exposure and also attracted a lot of investors. It led to the creation of thousands of new cryptocurrencies as well. Since the cryptocurrencies including Bitcoin stole all the headlines in the global business scene, this period is often referred as crypto honeymoon by even a large number of critics.

However, soon after the start of 2018, it experienced a massive fluctuation where its value declined by more than 60 percent. The cryptocurrency world is still trying to figure out the factors behind its massive price volatility and measures to be adopted during this situation.

This article features the possible reasons that contributed to the decline in the price of Bitcoin and Cryptocurrency.

1. Tough Government Regulations

The year started off with restrictive policies in India followed by South Korea, China, and Japan. The news, rumors, and guesses play a vital role in the cryptosphere and these regulations have affected the usage and price of Bitcoin.

  • India:

The Finance Minister of India made comments on cryptocurrency where he stated, the Indian government does not recognize any cryptocurrency and termed it as illegal. This statement cracked down the Indian cryptomarket. Though the significance of his speech is unknown within the market, the price of Bitcoin still went down.

  • South Korea

South Korea prohibited the trading of cryptocurrencies from unverified accounts in January 2018. According to this regulation, the details of the cryptocurrency accounts and the bank account should be matched. Thus, a fine system was proposed for violating the rule. As per the rule, only the users having identical virtual and real accounts are able to keep their crypto funds in the corresponding virtual wallet. This type of strict KYC regulations for crypto trading platforms was against anonymity, one of the core features of the cryptocurrency.

  • Japan:

Japan started the regulation on Bitcoin and cryptocurrency after Mt. Gox, Bitcoin exchange was collapsed. Though Japan has made a very positive initiation by legalizing Bitcoin and other cryptocurrencies, additional regulations didn't have the same impact.

  • China:

China banned the initial coin offering and foreign crypto trading exchange and even shut down all the local exchange. Similarly, all the cryptocurrency related advertisements were removed from the Search Engine and Social media. Being one of the capitals of mining and a leading player in the cryptomarket, China has surely influenced the Bitcoin rate. Almost all the countries following this market information took this case seriously.

2. Remarks by Notable Personalities

This excessive volatility, high speculation and lack of regulatory nature of Bitcoin have convinced the majority of mainstream financial stakeholders to conclude it as unsustainable. There have been numerous occasions where Bitcoin and their entire market was referred to as a giant bubble.

The speculative remarks on the existence of Bitcoin by influencing personalities like Jack Ma, Warren Buffet, Bill Gates and others have also affected the rate of Bitcoin.

Also Read: What do 10 Top Billionaires say about Blockchain, Bitcoin, and Cryptocurrency?

3. Increase in Popularity of Altcoins:

Bitcoin is still leading the cryptocurrency market since its existence. These days there are thousands of competitors of  Bitcoin. However, none of them have gained the hype of the Bitcoin. The success of altcoins in the stock exchange and their growth affects Bitcoin’s price.

4. Net Flow:

The net inflows of Bitcoin to exchange are strongly associated with Bitcoin price movements. When an exchange receives more Bitcoins in its wallet than it sends then there are the net inflows of the Bitcoin. It is based on the concept of supply and demand.  If the supply increases in comparison with demand, the prices significantly tend to decrease.

5. Natural decline

Back in December, the investment in the Bitcoin was extreme where it reached its peak. During this period everyone became interested in Bitcoin and was intensively buying it. Such intensive buying could not continue forever and now we are witnessing the natural outflow.

6. Change in the mindset of third parties :

The crypto-based visa cards allowed the conversion of fiat money instantly into the cryptocurrency and were accepted everywhere. Visa abruptly terminated its partnership with Wavecrest, a cryptocurrency debit card issuer by stating that they violated the operation regulation of Visa.

After this event, all the cryptocurrency prepaid cards were deactivated, thousands of transactions got declined. This instantly ended the payment in digital coins and left the customers worried about the future of the cryptocurrency.

7. Vulnerability of Bitcoin

Bitcoins and cryptocurrencies rank in the top priority of the hackers. Till this day, we have witnessed a lot of attacks on Bitcoin and exchange where million dollar worth Bitcoins were stolen. It can be interpreted that, after every hack, the cryptomarket shows a significant movement entirely affecting the price.

Also Read: 10 Popular Blockchain Hacks You must know

8. Linkage in Illegal Activities

As the Bitcoin users remain anonymous and can work from any part of the world. The governments are concerned about its misuse by criminals and money launderers. The news about the use of Bitcoin in trading of illegal drug named Synthetic Opioid Fentanyl has raised a serious question about its application in the future. Although the government is finding a solution to regulate them, however, no methods have been implemented to prevent it.

9. Lack of Ground Sentiment:

According to the Goldman Sachs Global Investment Research, Bitcoin compared with other assets as WTI (West Texas Intermediate or oil), Gold, the S&P 500 and a few others found Bitcoin to be the most volatile. The volatile and chaotic nature of Bitcoin has made many crypto-enthusiast lose interest in the cryptocurrency market.

The Bitcoin market is entirely based on some speculation, rumors or news. The lack of indicators and market principles in the industry causes unpredictable changes in the price. In order to receive stability and reach a sustainable equilibrium of the prices, a set of ground principles should be established.

10. Inexperienced Investors:

With the increase in the Bitcoin rate, almost every people of all age and no prior experience of financial operations flooded into the market. Almost everyone learned about this hype either through a social media or news. It was a perfect solution for everything from a Christmas gift to buying a new house. Sooner, the crypto market was full of amateurs looking for a quick profit. The lack of proper financial intelligence among those kinds of people shook the Bitcoin market.

Conclusion:

The price of Bitcoin has been fluctuating in between $6,000-$10,000 from March 2018 till present. However, it is still huge if compared to where it started in 2017. Due to the limited production of Bitcoin, many critics and crypto community encourage to believe in the power of Bitcoin in this tough phase as what they say, ”Bitcoin is here to stay”.

  • TAGS
  • bitcoin
  • blockchain
  • price
  • decreasing
  • cryptocurrency
  • crypto

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