March 12th, 2018
When Bitcoin first entered the market it seemed to be climbing with no stop in sight. That was until it tumbled to around $12,000. Bitcoin has been grabbing the attention of investors far and wide, especially since it is now climbing back up again. In 2017, the price of Bitcoin was soaring-it started at $964 and ended the year at $13,850, making for a 1338% increase. There was a moment when the price of Bitcoin almost reached $20,000 and led to a huge media story and gained even more exposure around the world.
The price Bitcoin, just like any other cryptocurrency can fall or increase in value due to supply and demand. Since Bitcoin is still in its beginning phases, there are numerous reason that can cause the value of Bitcoin to fall. Here are some of the main reasons behind its significant price falls.
Regulations on currency can have a huge impact on cryptocurrencies, as multiple countries have either banned or implemented regulations on this digital currency. If regulations become too burdensome, this could negatively impact the usage and price of digital currencies.
The challenge with many of the present regulations is that though one or multiple nations could ban the digital currency, it doesn’t necessarily keep Bitcoin investors from trading in other countries.
Bitcoins do not generate profits or revenues in the traditional sense. Bitcoin miners can create revenue for themselves and traders can charge a certain amount, but Bitcoin itself doesn’t do anything. There is no physical presence to Bitcoin. Since bitcoins don’t generate cash or profit like other assets, it is hard to put an actual value on this digital currency.
A tangible asset like Gold can be used to create something of value, but digital currencies only reside in a computer. If there are not enough uses developed for this cryptocurrency, the demand for Bitcoin could decrease in the future.
Bitcoin is highly volatile, making it good for traders but mentally tough for investors. If the trend of Bitcoin continues, the future may bring darker days fro the demand of Bitcoin from a wide range of investors.
Another concern that can lead to the price drop of Bitcoin is hacking or theft. The largest and well know theft of Bitcoin was Mt. Gox, a Bitcoin exchange in Japan.This Bitcoin exchange was handling a good percentage of Bitcoin transactions and was hacked in the year 2014. As more stories come to light of hacking or theft of bitcoins, less people want to invest in bitcoins.
Fear of missing out or FOMO creating a lemming effect. Investors from all over the world didn’t want to miss out on the next big thing in the financial market. The numbers of investors are still increasing, as there is a rush to participate in this new currency. But this situation can turn on itself quickly. If enough owners decide that they want out of Bitcoin, the prices could be affected dramatically.
“Cloud mining” is a new concept which basically means renting computer power from different companies and get paid according to the power you own. This sounds like a good idea for miners, since they don’t have to make much of an investment. These types of scams are continuing to grab the Bitcoin enthusiasts. If these scams “burn” too many people, prices will drop.
One of the main reasons that several governments around the world are concerned about digital currencies is that the money launderers and criminals use these cryptocurrency. There are also speculations that a few countries are using digital currency to circumvent sanctions. Bitcoin users remain anonymous and can work from any part of the world. This is one of the reasons many people are attracted to Bitcoin. However, when authorities can find a way to regulate bitcoins the demand will decrease.
The global financial market is based on trust between companies, individuals, and governments. If the trust in these cryptocurrencies falls, this will lead to fall in its price.