What Caused Bitcoin's Price to Suddenly Drop Below $20,000?

Bitcoin, the world’s largest cryptocurrency by market capitalization, has surprised many investors by suddenly dropping below $20,000 and stabilizing at around $12,000 per token. This was a far cry from its all-time high of just over $20,000 set in mid-December 2017, marking an 84% price drop in less than six months—but still not as dramatic as Bitcoin’s 100% price drop from early November 2013 to early December 2015 (which also coincided with Mt. Gox bankruptcy and a huge loss of trust in the currency). What caused this sudden change Bitcoin Price?

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Why Is Bitcoin Price Dropping?

Well, we can’t actually be sure. Analysts have speculated a number of factors (low volumes and uncertainty surrounding regulatory action have been among them) that may have contributed to bitcoin’s recent price drop. However, it is worth noting that many of these theories are far from concrete. Until more clarity emerges as to what exactly is driving down bitcoin prices, market analysts will remain divided on what could happen next with regards to its value and performance over time. However, it would appear that investors are now bracing for a prolonged period of bearish pressure on cryptocurrency markets; some crypto experts now believe that bitcoin’s recent drop below $10K is just a precursor of things to come—in terms of both price and volatility.

How Are People Reacting?

Everybody’s talking about it, says Alex Sunnarborg, a founding partner at crypto hedge fund Tetras Capital. We’re in a bear market right now, so even if there is no news or big drop people are still scared. Everybody thought we were going to go up forever. That said, he adds that a lot of investors aren’t too worried: People aren’t convinced that prices will be much lower for long—the thinking is it might stabilize here for months and then get back up. Jeff Dorman agrees: I do think it’s healthy for markets [to correct]. The longer time frames show higher lows than lows from last year when bitcoin was at an all-time high.

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Why Did Bitcoin Surpass $19k In The First Place?

Many attribute bitcoin’s rapid price rise in December 2017 to an increase in trading volume and interest from Japanese investors. Interest surged as Coincheck—an exchange based in Tokyo—was hacked, creating a huge demand for bitcoin in Japan. On December 7th, Mt Gox creditors began releasing their claims on funds owed by defunct bitcoin exchange Mt Gox. This process will continue until April 24th 2019 and is expected to have some effect on bitcoin’s price. Many predict that since bitcoin is relatively unregulated and has a reputation for being used by criminals, that regulators will be slow or unwilling to step in if there are sudden dips or even a major crash.

Where Will The Bitcoin Price Go From Here?

If you were previously bullish on Bitcoin and are wondering where prices will go from here, there are two ways of looking at it. The first is that it could be a good opportunity to buy in. After all, many investors and analysts expect cryptocurrencies to continue fluctuating for some time yet as governments around the world (try as they might) struggle with setting policies. But if you’re not interested in entering at these prices, now could also be a good time to take some profits—as long as you have another cryptocurrency to hold instead of keeping your funds in cash. As noted above: History has shown that no investment goes up forever.

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Other Cryptocurrencies Are Also On A Steep Decline

Ether, for example, is down more than 20 percent at time of writing. And so are most other major cryptocurrencies. For example, Dash has lost 30 percent of its value in less than 24 hours (down from nearly $800 to just over $600). The biggest exception to today’s downtrend is Monero. But then again: Monero dropped below $300 a few hours ago as well… What Happened? No one really knows. As always with cryptocurrencies, there’s no single cause and no single person who knows what they’re doing.

The Crypto Market Lost Over Half Its Value In January 2018 Alone

The total market capitalization dropped from $830 billion in early January 2018 to just above $250 billion mid-month. We do know there were several large drops in price during that time period that are likely responsible for much of that loss. According to Coindesk , those include an 18% drop on January 7, a 30% drop on January 8 and a 20% drop on January 17. Those four drops alone caused almost half of the market’s value loss in just one month! Why did bitcoin’s price suddenly drop so far and so fast? Market manipulation is always a possibility.