The Bitcoin bashers have had a ball in recent weeks as the world’s most popular digital currency plunged to new lows dropping over 40% in just a few weeks. The pain it seems is far from over as some analysts are predicting even more losses for both Bitcoin and its crypto brethren.
Following November’s market crash, when more than $70 billion exited the digital currency markets, Bitcoin found a temporary support level at just over $4,000. This week, however, the bears returned and it has now dropped to around $3,700. Indeed, technical indicators show that further losses could be on the cards and that it could go down further than last month’s yearly lows of $3,450 to $3,000 or lower.
Some, like the well-respected financial media outlet, MarketWatch, are even starting to say that Bitcoin is in a death spiral and destined to go to zero. Its reasoning is that once Bitcoin drops to a certain price it becomes no longer profitable to mine. What it failed to acknowledge is that when miners dwindle, the difficulty and hashrate – or computing power – required to find the next block on the Bitcoin chain also drops making mining that little bit easier.
What is undeniable though is the likelihood of further declines in Bitcoin’s price. According to Bloomberg Intelligence analyst Mike McGlone, there is “little to prevent fading Bitcoin prices from reaching the continuous mean of $1,500… We’re at a classic psychological stage where the market is reversing the 2017 frenzy. The hard fork was a key trigger that signaled the technology is way too nascent. You had these dicey characters threatening to destroy each other and institutions said ‘It might be best if we stay away from this for a while.’”
The Bitcoin Cash fork and resultant infighting between the two camps involved in that did no favors for cryptocurrencies. Neither has the US Securities and Exchange Commission with its recent crackdowns on two initial coin offerings and those with celebrity endorsements. The likelihood of the regulator approving a crypto-exchange traded fund is growing slimmer and confidence in crypto is, for this year at least, at an all-time low.
McGlone added that “the trend this year is clearly sustainable – it’s a positive trend, the trend is lower prices, lower volatility, reduced speculation, and the preponderance of stablecoins.”
Lower volatility is a good thing for the industry and Bitcoin has crashed by similar percentages several times before. It could be that the markets are now near to the bottom. Maybe.