2017 was Bitcoin’s year, as the pioneer cryptocurrency was able to hit the $20,000 mark this year. Its astronomical rise was due to many things primarily its potential and how its technology can be used for different purposes. But just recently, Bitcoin’s value starts to drop.
It has even reached below the $14,000 mark. It has dropped by 30% from its $20,000 mark earlier this week. Just how crucial is this drop? If you want to put things into perspective, Bitcoin has lost $121 billion total of its total market value in just a week. What could most likely be the reason for this?
Correction and Diversification?
Bitcoin started 2017 at $1,000. This only means that at its peak this year, it has increased by as much as $19,666. According to Shane Chanel, equities and derivatives adviser for ASR Wealth Advisers in Sydney, Australia, since Bitcoin’s value has gone up tremendously this year, we can expect a correction to take place.
There is a possibility that a lot of individuals are also looking to diversify in different cryptocurrencies that are looking to be the next Bitcoin. If you will look at Ripple and Verge, these altcoins have gained a 400% jump in the last week alone. Both Verge and Ripple are direct competitors of Bitcoin emulating what the pioneer virtual currency has.
However, keep in mind that this is normal. In November, Bitcoin also tumbled by almost 30% from $7,888 to $5,555. Last September, Bitcoin dropped by 40% from $4,979 to $2,972. What people should understand is that Bitcoin is similar to gambling since you don’t really follow logical patterns.
Unlike the usual investments such as bonds as well as equities that are quite predictable in nature, Bitcoin is quite different. This only means that it is more of a gamble than an investment.
Other Cryptocurrencies Are Losing Value as Well
Bitcoin isn’t the only cryptocurrency that has lost some value recently. Ethereum, for instance, has dropped 26% in just 24 hours. Litecoin as well also plunged by 32%.
Litecoin creator, Charlie Lee has decided to sell all his Litecoin shares in order to prevent conflict of interest whenever he is promoting the cryptocurrency. He also warned that “every crypto bull run I’ve seen has been followed by a bear cycle”.
Should You Be Alarmed?
So should you be alarmed that Bitcoin just dropped in value over the last week? Will this continue to drop this 2018? Or should you start investing in Bitcoin and wait for the next bullish trend?
In reality, no one has the answers for this. Despite the growing interest even by corporations and that is contributing to the cryptocurrency’s legitimacy, it is imperative that you still consider Bitcoin as a high-risk investment. At this point, we are still in the early stage of cryptocurrency development. And in reality, not everyone is aware what they are getting into.
Skeptics from central banks to government officials believe that Bitcoin is a bubble waiting to burst in the near future and they believe that it isn’t going to end well.