Well, it looks like things have taken a turn for the worse. Bitcoin, the world’s largest cryptocurrency by market cap, has collapsed by roughly $2,000, falling from about $19,000 before Thanksgiving to $17,000.
Bitcoin Loses Quite a Bit of Momentum
Why, suddenly? The currency was making many traders believe that things were well underway to repeat themselves as they were in 2017. While we’ve still got a month left in 2020 and the currency could easily turn itself around in that time, this is not a great signal.
Bitcoin isn’t the only asset that has fallen into negative waters. Several leading digital assets, including bitcoin cash, Ethereum, Litecoin and Chainlink, have also retracted somewhat over the past 48 hours. Overall, as much as $50 billion was lost from the cryptocurrency arena.
Sui Chung – chief executive of CF Benchmarks – explained in a recent interview:
For the past few days, the market was in a slightly febrile mood as it waited nervously to see if bitcoin would pass the $20,000 barrier.
She blames bitcoin’s recent price drop on news that popular cryptocurrency trading platform OKEx has begun allowing withdrawals again after locking itself up following an investigation from law enforcement in Hong Kong. She says that many people are likely realizing the profits had by bitcoin over the past few days and don’t want to take a chance. Thus, they are selling their coins for USD and other forms of fiat.
She continues to say:
Most of the frozen bitcoin had traded up around 70 percent, so there were a lot of unrealized profits locked up there. Once these coins were free to move, it’s likely many trades sold them for dollars and stable coins to realize those gains, adding greater momentum to the selling.
Despite the recent setback, many analysts and industry experts believe that this is only temporary, and that bitcoin could potentially resume its bullish behavior before the year’s end. Vijay Ayyar – one of the heads of the Luno cryptocurrency exchange – mentioned in a recent statement:
The global macro environment has made bitcoin increasingly prominent as a potential hedge against the traditional banking and financial system. The narrative of bitcoin as a safe alternative to traditional finances is being established without a doubt. Gold is starting to become less relevant, especially for the younger population and investors and this shift from gold to bitcoin has just begun.
Is This Only Temporary?
Black Rock chief investment officer Rick Rieder went so far as to claim that bitcoin could one day replace gold. He mentioned:
Do I think [bitcoin is] a durable mechanism that could take the place of gold to a large extent? Yeah, I do, because it’s so much more functional than passing a bar of gold around.