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Bitcoin worst month since 2018 bear market

Bitcoin’s short decade of existence

September 2, 2021 | 

650 Views | 

Jesus Guzman | 

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From $57,829 at the beginning of May, Bitcoin, the world’s biggest cryptocurrency, closed at $37,341, a record negative deviation of 36%. In the same month, it had recovered from a $30,000 low and hit a $40,500 high but failed to sustain its gains, becoming Bitcoin worst month yet.

The most recent fluctuation, branded “crypto winter,” worsened over a single weekend. According to data from CoinDesk, during this weekend, Bitcoin dropped below $3,500 for the first time in 14 months, then later recovered to $3,900 by the beginning of the next week, bringing its decline from last year’s peak to at least 81 per cent.

This is not the worst the cryptocurrency has suffered, but it is undoubtedly getting close by the day.

Fundamental Overview

From 14th to 20th May, when Bitcoin faced a negative deviation of close to 47%, investors suffered losses amounting to $14.2 billion. An on-chain report from Glassnode reported a $4.53 billion loss on 19th May and $14.2 billion for the week. Since its conception, the crypto-giant has seen its fair share of ups and downs.

Back in 2010 to 2013 after conception

At conception 2010, Bitcoin’s level was well above a penny’s price fraction. Hence its pioneer investors are still the wealthiest owners. As June 2011 approached, its value had significantly grown to an all-time high of about $30. However, in November, it had fallen to below $2.50, dropping more than 92%.

Throughout this year, Bitcoin volume was still low, and by this time, some renowned cryptocurrencies such as Coinbase were still not in existence. During the time, Bitcoin’s Tokyo-based exchange, Mt. Gox, was handling about 70% of its transactions globally. Mt. Gox experienced its first series of hacks in 2011, leading to its eventual downfall, coinciding with its next bear market in 2013.

2013 through 2015

Barely two years later, most of Bitcoin’s trading was still being handled on the soon-to-be-defunct Mt. Gox exchange. As 2015 closed in, Mt. Gox was frozen out of the US banking system because of regulatory issues and stopped trading, closed its website, and filed for bankruptcy insurance.

However, according to data from CoinDesk, in December 2013, Bitcoin first shot above the $1,000 mark but fell back to below $200, experiencing an 84% collapse between the two years.

2016 to 2018

According to CoinMarketCap.com, measured in American dollars, 2018’s damage became evermore significant, facing a $700 billion loss off the cryptocurrencies’ global market. Since December of that year, the price of one Bitcoin dropped more than $15,000, further losing credibility in the financial market.

Bitcoin climbed sharply to a current all-time high of about $20,000 in December 2017. Coinbase’s CEO reported in that summer that at the peak of that boom, the cryptocurrency saw a record 50,000 new accounts created per day, especially by many retail investors. This was primarily attributed to the availability of Bitcoin futures, which soon followed suit and fell.

Trading volumes also fell drastically, recording $49 billion at the peak and a negative deviation of about 61%, amounting to $19 billion in a single weekend.

These fluctuations have cryptocurrency bulls still anticipating more short-term losses. Anthony Pompliano, the partner and founder of Morgan Creek Digital Assets, predicted an 85% free-fall from the all-time high, making the year’s downturn the second-worst market for Bitcoin, suggesting a price of about $3,000.

Still, despite its volatility, Pompliano is sure about its long-term value as it is still up more than 400% in the past two years, far outpacing the S&P 500′s 20 gains during the same time frame. Financial experts claim that through 2017, most, if not all of the buyers were retail traders, and as the price keeps drawing down, institutional investors begin sliding in.

Reasons for Bitcoin worst month

Criticism surrounding Tether’s reserve, Tesla’s chief Elon Musk’s announcement that his company would no longer accept Bitcoin payments, China reiterating its ban on financial institutions from participating in crypto, and news that Binance is under investigation by the US Department of Justice have only served to add fuel to the already burning cryptocurrency.

Moreover, According to research conducted by Camilla Hodgson from a business insider, Bitcoin’s price in 2017 had an almost perfect direct correlation with how often the term was searched for online. Also, the main reason for the bear market drop for Bitcoin worst month included higher-than-expected inflation data in the US

Other reasons for Bitcoin worst month

  1. There has been too much variance in perceptions of Bitcoin’s value method and store of value by financial advisers.
  1. The rate of absorption is limited by the bad press preceding its downfall, has a predictive effect on the market value. International news information has been scaring Bitcoin users, including geopolitical events and government statements that Bitcoin is likely to be regulated.
  1. Too much variance in perceptions and understanding of how cryptocurrencies work, only to scare retail investors who are afraid of losses.
  1. There has been little to no option value to large currency holders, leading to severe insecurities by owners.
  1. Wildfire news about security breaches and hacking vulnerabilities makes investors panic and flee.
  1. The tax treatment of Bitcoin has always been having a negative effect on its volatility.
  1. There have been severe scalability issues. To date, global cryptocurrencies have had difficulties scaling up, where Ethereum can only process 13 transactions per second and Bitcoin can only process seven transactions per second. In contrast, Visa Inc. is capable of handling at least 56,000 transactions per second. With such disparities, it has become overly slow for many users to transact at the same time.
  1. Stiff competition by the rising cryptocurrencies globally has severely limited Bitcoins growth since its conception.
  1. There has been an increased number of futures use, and creating a futures market for Bitcoin trade has had drastic effects on the young currency.

When will the bear market end?

When predicting the future of Bitcoin is under question, you need to consider that there has traditionally been a covert competition between bookmakers and economists about who the worst predictor of coming events is.

Consider in 2017 when the financial analysts and blockchain enthusiasts were expecting Bitcoin to grow at least x100 while others still believed it could hit $60,000 the same year.

According to Cointelegraph analysis and Bitcoin chart, a breakout above $7,000 increases the probability of a rally to $7,750. On the other hand, the Bitcoin to US Dollar pair will face intense selling pressure from the horizontal resistance and the downtrend line.

Once this level is convincingly crossed, a rally to $10,000 should be on the cards.

Additionally, it is vital to identify that Bitcoin trading volume is nearly 70% of the total cryptocurrency market, meaning that a significant crash in its market can sink the whole cryptocurrency market with it. The future of Bitcoin is anything but certain, and making Bitcoin bubble predictions is almost 100% bound to fail.

Nonetheless, considering crypto’s trend over the years, it is only logical to assume that Bitcoin’s price will continue to be volatile, at least for the short term.

Unless something drastic happens, such as the USA lifting bans on all the crypto exchanges or China lifting the ban on cryptocurrencies, the crypto market still anticipates Bitcoins worst month in the coming years

Final Thoughts

As is the case with traditional crises, cryptocurrencies’ bearish trend in the global market may threaten the living standards of many Bitcoin owners. On the other hand, the performance of the top five cryptos signifies an investment opportunity where they buy while prices are low and sell when high. The bottom line is, you should keep in mind that investing in crypto is a crazy rollercoaster ride of emotions, due to its volatility.

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