We will remember 2017 as the year of the cryptocurrencies. In that year, especially in the last quarter, Bitcoin and the other virtual currencies saw exponential growth unlike anything that had ever been seen before.
In the fourth quarter of 2017 Bitcoin grew by almost 500% internationally, the price of one Bitcoin rising from $4000 and crossing $20,000 on some exchanges. In Zimbabwe where Bitcoin trades at a premium, the price crossed the $30,000 mark.
What goes up must come down apparently, and how the mighty have fallen. Cryptocurrencies are full of drama, the exponential growths have been followed by dramatic declines. In January when the international price of bitcoin dropped below $10,000 we wondered whether the bubble had burst.
Since that time, the downward trend has continued. The rate of decline has been especially heavy in the last 24 hours. Internationally the price reached $5,947 but has risen to $6,172 at the time of writing. If we work with the current $6,172, bitcoin has fallen around 22% in the last 24 hours. [At the time of publishing the price has risen to $7,084, pricing by CoinDesk.]
On Golix, Zimbabwe’s sole cryptocurrency exchange, bitcoin is trading at around $10,000 at the time of writing. It reached a low of $9,500 in the last 24 hours however. This is a far cry from the $30,000 it reached back in December. [Price now $11,400 at this time of publishing]
What is the reason for the decline?
We covered the reasons in the article, Why Did Bitcoin Fall By 50% And Is It Proof The Bubble Has Burst? We won’t go through all of it again but we will consider what has changed since then.
Governments vs cryptocurrencies
The South Korean government has come out to say it has no plans to shut down cryptocurrency trading. This came as welcome news. However, China and India have stepped up efforts to block cryptocurrency trading. In China, they want to block local investor access to cryptocurrency exchanges anywhere in the world, not just in China.
These efforts by these governments have a profound effect because it was the Asian investors who were responsible for bitcoin’s meteoric rise in the first place. By the end of November 2017, Japan, South Korea and Vietnam were responsible for about 80% of all bitcoin trade. Rumours and reports around Asia that bitcoin trading was to be banned is probably the biggest reason bitcoin prices are falling.
Trading with cryptocurrencies
We covered how mobile payment systems giant, Stripe no longer accepts bitcoin and since that time Microsoft, Steam and other e-commerce operators have followed suit. This all came after Visa ended its relationship with WaveCrest, a cryptocurrency credit card provider.
I almost let out a laugh when I heard the North American Bitcoin conference announce they will not be accepting bitcoin any longer.
These institutions made these decisions in response to bitcoin’s price volatility which was mostly caused by the cracking down happening in Asia. However, the decisions to stop accepting bitcoin added to the pressures driving its price down.
It is no secret that banks, like governments, have always been opposed to cryptocurrencies. They got the excuse they needed to drop bitcoin and send a message to the world – only their system can stand.
Bank of America, JP Morgan, Lloyds Bank, Bank of Scotland and many other banks have banned their customers from purchasing cryptocurrencies on the exchanges.
Again, these moves, work to weaken bitcoin. They may be reactionary but they worsen the problem.
Is it the end for cryptocurrencies?
Looking at the governments working towards banning cryptocurrencies, retailers refusing payment and banks banning cryptocurrency purchases by credit card holders, it will be interesting to see how the cryptocurrencies come out of this one.
In my humble opinion, bitcoin will rise again. This is not the first time there have been wild price fluctuations in its history. The previous fluctuations were actually worse. An example would be when in 2011, the price went from $29 in June to $2 in November, that’s a 93% decrease. These fluctuations come with the cryptocurrency package but in the long run there is an upward trend.
If you are looking for short term gains, you are playing a very dangerous game but if you are looking to cryptocurrencies to preserve value in the long term then you might just strike gold.