Request a call

Bitcoin Bubble Bursts. Revisiting What Went Wrong!

Last updated on December 3, 2018 by Dotsquares

The inevitable has happened, the Bitcoin bubble has burst and has taken the investors down by 75%. Specifically, the investors who chose to invest when Bitcoin was at its highest value.

With no collateral, investing in Bitcoin or any digital currency has always been considered risky.

It was indeed the sheer brilliance of the Blockchain technology that made Bitcoin such an appealing investment. However, the success that the cryptocurrency witnessed in the holiday season last year turned out to be a simple case of misplaced optimism.

The idea of a decentralised currency gained momentum following political, and therefore social, turbulence. The fact that this new way to buy and sell things was also seen as a shiny new toy that many people wanted to learn about by using the tech with their own hands. However, to most analysts, as well as experienced investors, it was clear that the sheer absence of a central node would bring crypto money under the scrutiny of the regulators, and once that happened, it would surely lose its status as a profitable scheme.

In the first quarter of the year 2018, the prices of cryptocurrency fell to 50% from the peak exchange rate and it started to become clear that the volatility of the crypto market would cause its downfall, with more corrective measures being applied. Bill Barhydt, the CEO at Abra, a Silicon-Valley-based cryptocurrency business, clarified that the involvement of regulators, would for the initial phases, plummet the value of cryptocurrency. But this phase would be more like a correction in the market, which is important to keep scammers at bay.

In fact, the involvement of regulators will only ensure that the currency becomes more reliable with the right amount of collateral in its account. As Bill has said,“We’re getting closer and closer to real clarity in the West that it’s OK putting half a per cent of your assets into crypto”

It was noted that there was ‘zero large-scale institutional money from the west in Crypto’. Though situations in that area haven’t changed much, realism is coming around the corner for Blockchain at least and clearly, once the tech itself becomes less nebulous and the concept of cryptocurrency becomes more regularised, the investments in crypto will no longer be seen as a gamble.

Bitcoin Cash

An offshoot of Bitcoin, Bitcoin Cash has also been attributed for the more recent downfall of the currency, specifically the hard fork of bitcoin cash, ABC, and bitcoin cash, SV. The currency has recently split into the two areas, with their own separate sets of rules. Apparently, such dynamism in an asset that has not even created a stable foundation, for its price is bound to have certain repercussions.

Despite this fact, the price of the currency has become more stable, after coming back to the rates at which the hike began, it is imperative that the investors bring certain stability in the market before experimenting any further. After all, it was the promised stability of the limited number of 21 million bitcoins that prompted investors to take the huge risk. Now, such hard forks raise the possibility of the birth of more cryptocurrencies adding to the existing chaos in the industry.

Resources:

https://www.forbes.com/sites/cbovaird/2018/11/19/bitcoin-prices-have-fallen-75-from-all-time-high/#92e5da35fd14

https://www.bbc.co.uk/news/technology-46263998