Bitcoin has slipped below $7,000 to hover in the mid-six thousand range again this week with growing speculation that it may fall below six as investors get panicky and sell. Maybe the question to ask is, is this the start of a new bear market or just a return to normalcy?
Maybe it’s Not a Bear Market
The six-month meteoric rise of cryptocurrency prices and popularity from July 2017 through to January 2018 made a lot of people rich and brought a lot of attention to the space but it may also have caused a lot of damage to the long-term growth and development of the technology.
When the rush was on buying Bitcoin became a get rich fast scheme for many and that in turn brought in the scammers which got the attention of the worlds regulatory bodies who, without really knowing how to classify digital monies, have created an environment of doubt and fear around them. For those who bought in late 2017 when Bitcoin was at record highs, the recent price marks feel like massive drops in value but step back a bit to look at Bitcoin over a two year period and the term bear market does not apply.
It’s true that Bitcoin fell in value this week losing 4.6% alone on Tuesday and that it is down over 50% so far this year but look back a year ago to June 2017 to see that it was trading at around $2,000 then. Travel back another year and it was selling for about $750 per coin. Perhaps what we are seeing is a return to a realistic valuation of the coin after it experienced an unprecedented 1,400% surge in price over six months in 2017.
Lower prices May be a Good Thing
Commenting on reasons for the recent downturn Kyle Samani, managing partner at Austin, Texas-based crypto hedge fund Multicoin Capital told MSN Money “I don’t think this is driven on any particular news, just the general downtrend after the 2017 run,” before adding;
“A lot of people who bought at $9,000 in April are realizing that they’re not going to break even anytime soon, and are instead trying to get out.”
This bursting bubble, bear market or return to realistic valuations may be good for the space and the future of the technology in the long run. Without the possibility of overnight riches, the scammers and pitchmen should fall away, the shitcoins disappear, regulatory agencies can take a breath and finally present some clarity and those who truly believe in crypto will be left to continue developing the technology.