Bitcoin has been tumbling, down around 20% at one point just today.
Earlier in the week, Bitcoin was trading for just under $3,000 per coin, then suddenly the rug was pulled and Bitcoin has been fading ever since.
A few hours ago Bitcoin traded as low as $2,000 per coin, making for over a 30% decline in prices since the highs of Monday.
However, it's not just Bitcoin that has been falling. If you look across the virtual currency space you will likely see a sea of red.
What gives?
Well a couple things actually.
First, there has been the major outages and hacks on major virtual currency exchanges.
On Monday evening Coinbase was shut down due to extremely high trading volumes. Bitcoin seemed to weaken considerably after that announcement.
Coinbase has been one of the better exchanges out there to date and they have been having numerous problems recently. Today when I tried to log in, the site was again down with something along the lines of this posted on their website:
We are investigating issues with load times and customers may be unable to load or log in to the website during this time.
It was unclear how long that warning had been up, but I know for me personally, I was unable to access the site for over 2 hours.
Then there was the issue with Bitfinex.
They tweeted on Tuesday that they had been under a DDoS attack. Which further squashed confidence in the space.
Especially when you consider that Bitfinex had over $65 million stolen by hackers last year alone.
Basically people are being reminded in a very abrupt way that the infrastructure for the virtual currency space is still very much in it's infancy and liquidity can be a problem at times.
The founder of Atlantic Financial and board member at Bitcoin Foundation, Bruce Fenton was less worried and had this to say regarding Coinbase:
"Coinbase's issues are just typical growing pains. When the whole financial system is upended, it's bound to have some bumps in the road."
I especially like that middle part, "When the whole financial system is upended...."
Remember folks, these virtual currencies are either going to change everything in terms of how people transact or they are going to zero at some point. They are either going to be worth a lot more or a lot less.
I am betting on the former.
Some other possible causes for the recent weakness in the space:
The Federal Reserve raised interest rates, which in general tends to put a damper on riskier assets. US Tech stocks took a bit of tumble ever since the hike. It is a bit unusual for the FED to be raising interest rates at a time when inflation rates are going down, but we have been living in unusual monetary policy times for quite some time now.
Also...
At the time that Bitcoin was declining, there was a closure of millions of dollars in long positions on OKCoin. Which is one of the major leveraged Bitcoin exchanges. That selling likely exacerbated the moves down.
The actual decline was probably caused by some combination of all of the above. Likely initially sparked by a change in confidence. Markets sure are fragile things aren't they?!
Stay informed my friends!
Sources:
https://seekingalpha.com/news/3273785-bitcoin-track-worst-week-two-years
https://www.bloomberg.com/technology
Image Sources:
http://fortune.com/2017/03/09/bitcoin-sec-etf/
https://www.bloomberg.com/technology
https://www.guerillastocktrading.com/business/why-the-coming-fed-rate-hike-could-leave-you-broke/
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