Why has the price of Bitcoin and other cryptocurrencies dropped so dramatically in 2018? Let’s take a look at some of the possible reasons.
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Introduction
Cryptocurrencies have been on a rollercoaster ride over the past few months. After hitting an all-time high in early January, prices have dropped sharply, with many coins losing over 50% of their value. So what’s behind this sudden crash?
There are a few possible explanations. One is that the hype around cryptoassets has died down, and people are no longer buying them in such large numbers. Another is that regulation is starting to bite, with governments around the world cracking down on exchanges and Initial Coin Offerings (ICOs).
Whatever the reasons, it’s clear that the crypto market is going through a tough time at the moment. Prices could continue to fall in the short-term, but in the long-run, many people still believe that cryptocurrencies will recover and new highs will be reached.
The Mt. Gox hack
The Mt. Gox hack was a catalytic event that plunged the crypto markets into a prolonged bear market.
Mt. Gox was once the world’s largest Bitcoin exchange, handling over 70% of all BTC transactions at its peak. But in February 2014, 850,000 Bitcoin (worth $473 million at the time) were stolen from Mt. Gox’s coffers, and the exchange filed for bankruptcy.
The hack sent shockwaves through the crypto community, and many people lost faith in Bitcoin and other digital currencies. The price of BTC plummeted from around $900 to below $200 in the months following the hack, and it took nearly two years for it to recover its lost value.
The Mt. Gox hack was a major setback for the young crypto industry, and it’s still felt today. Many people still view crypto with suspicion because of this early hacking scandal, and this event is often cited as one of the main reasons why cryptocurrencies have not been more widely adopted.
The Chinese ban
China’s recent decision to ban cryptocurrency exchanges has sent the prices of Bitcoin and other digital currencies tumbling.
China’s ban is just the latest setback for the embattled cryptocurrency industry, which has been roiled by hacking scandals, regulatory crackdowns and a sharp sell-off in prices this year.
Bitcoin, the most well-known cryptocurrency, tumbled more than 10 percent on Friday after China announced the ban. Other digital currencies also fell sharply.
The sell-off continued on Saturday, with Bitcoin falling below $4,000 for the first time since September. Ethereum, another popular cryptocurrency, dropped below $300.
The plunge in prices came after a whirlwind week for cryptocurrencies. On Tuesday, one of the largest Bitcoin exchanges in China, BTC China, said it would stop trading at the end of September because of Beijing’s crackdown on the industry.
That followed a similar announcement from another major Chinese exchange, OKCoin. Both BTC China and OKCoin had previously stopped letting customers withdraw their money from their accounts.
The ICO bubble
The ICO bubble is one of the main reasons why crypto has dropped. An ICO is an initial coin offering, and it’s basically when a company offers digital tokens in exchange for investments. This became popular in 2017, and a lot of companies took advantage of investors’ FOMO (fear of missing out). Unfortunately, many of these companies turned out to be scams, and when people realized this, they started selling their cryptos.
The death of Bitcoin?
The value of Bitcoin and other cryptocurrencies have dropped sharply in recent days, leading some to wonder if the entire market is in danger of collapse.
There are a variety of reasons why this might be the case, including:
-The end of the ” ICO boom”: Initial Coin Offerings (ICOs) have become much less common in 2018, as regulations have tightened and investors have become more cautious. This has reduced demand for Bitcoin and other cryptocurrencies, as ICOs were often used to purchase them.
-Increased regulation: Several countries (including China and South Korea) have cracked down on cryptocurrency trading, leading to decreased demand.
-The Mt. Gox saga: The ongoing saga of the Mt. Gox Bitcoin exchange (which filed for bankruptcy in 2014 after losing 850,000 Bitcoins) has also been a drag on the market. A recent report that suggested that many of those Bitcoins may have been stolen rather than lost has further eroded confidence.
Conclusion
The bottom line is that no one can completely explain why crypto has dropped. While there are many possible explanations, the most likely cause is a combination of factors. These include regulatory uncertainty, the end of the Bitcoin bull run, and fears of a global economic downturn. Whatever the reasons, it’s important to remember that crypto is a volatile market and prices can go up or down at any time. If you’re thinking of investing in crypto, it’s important to do your research and understand the risks involved.
