During the last couple of months, the price of Bitcoin has been extremely volatile, after falling from its all-time high of $20,000 in December, to approximately $6,000 a few days ago. This has led to panic-selling and a slight decrease in the popularity of digital currencies, as the entire crypto market capitalization also decreased by a few billion dollars. Luckily, recent days have brought along a bullish move, thus moving the bitcoin price up to $8,200 from its $6,900 value.
The reasons behind this price rollercoaster are highly-debated amongst economic analysts. In this article, we will outline a few of the main reasons behind the massive price drop.
1. Unclear regulation
Following the massive price spike back in December 2017, financial institutions throughout the world have begun working on a regulatory framework. The lack of cross-country collaborations has led to different attitudes, resulting in unequal and unclear laws. For instance, in the United States, the IRS has issued a warning stating that those who have either purchased/sold cryptocurrencies are liable for tax filing. In return, this has led to many people selling, in order to gather the funds needed. Not only this, but South Korea has implemented several regulations, and made a statement saying that they’re planning the ban of crypto trading.
China has also adopted legislation that is unfriendly to crypto users. Lately, the country has banned Initial Coin Offerings, crypto trading, and imposed several limits on mining.
Once prices began falling, the price drop was accentuated as numerous investors and crypto users have begun selling their digital currencies out of fear of losing larger amounts. The bearish move led to a lower actual use of cryptocurrencies, and in return, a price drop.
3. The Initial Coin Offering craze
ICOs have faced massive popularity from the start, yet the ICO market is plagued by numerous scam projects, which raise investor money and then disappear with no trace. Not only this, but numerous start-ups running ICOs are bound to fail, thus leading to a higher risk in this investment sector.
4. Internet criminality
As the popularity of digital currencies continues to increase, so will the number of attacks meant to either steal or extort money from individuals, exchanges and other companies. Here, we can also include mining scams, and the use of digital currencies to purchase/sell illegal services and products.
All of these factors, backed by statements against digital currencies have been the source of the massive price drop. Fortunately, the bright side is here, and numerous economic analysts believe that crypto prices will continue to increase within the next couple of months. Additionally, many believe that the all-time high of $20,000 for bitcoin will be beaten sooner than initially expected.