Cryptocurrency Prices Dip, but Fans Believe in Revival

After the explosion of crypto coin prices in December, the digital currency fever has calmed down and many traders worry about a further downturn.

by Konstantin Simidchiyski
06 February • 2 min
In News

The best known virtual currency, Bitcoin, has lost about two-thirds of its value over a month and a half after hitting a peak of more than USD 19 000 in mid-December. Presently, its price dropped to as low as USD 6300. Rivals, such as Llitecoin, Ripple and Ethereum have also registered a double-digit percentage decrease in value within the last few weeks.

The recent surge in the cryptocurrency market came as a big surprise for many players. It was another addition to all the challenges in terms of regulation of this new market. Many governments all over the world are suppressing the presence of digital money, fearing from account security, fraud and manipulation. Recently, social media giant Facebook announced a ban on ads promoting various cryptocurrencies and Initial Coin Offerings (ICOs) that bring new tokens to the market in a way which resembles the launching of stocks by the use of Initial Public Offerings (IPOs).

In the US, the testifying of the heads of the Commodity Futures Trading Commission and the Securities and Exchange Commission about cryptocurrencies before the Senate Banking Committee is hoped to bring more clarity to the shaky market.

 

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Is It a Bubble

It is difficult to judge whether the cryptomarket is a bubble, something that many prominent investors like Warren Buffett have been talking about. Analysts believe that such bubbles are quite difficult to recognize as their main features are controversial. Fact is that the formation of bubbles is gradual but their deflation is very quick.

Nevertheless, there is still a myriad of devoted cryptocurrency fans.

For example, Tom Lee, who is the co-founder and also the head of research for Fundstrat Global Advisors, recently predicted, as quoted by CNBC, that Bitcoin may actually double and maybe even triple this year. He has also argued that Bitcoin is taking a share of the market for gold, as while Bitcoin has gained over 540% for the last year, gold is up just about 11% for the same period.

Moreover, the Wall Street Journal recalled that there have been five major drops of Bitcoin, amounting to over 70%, throughout its nine-year life. They include two extreme slides of over 90% each. But Bitcoin recovered and even gained more each of these times. However, it cannot be certain that a particular performance would happen again.