Bitcoin Bubble Burst? Rapid Decline Could Spell End of Crypto Gold Rush
by: The Knowledge Group
A little over a month ago, the price of the cryptocurrency Bitcoin rocketed to an all-time high of $19,343 per coin. Now, as of January 19th, the price is hovering at just under $12,000 – marking a 38% drop from its December high.
Given the concerns about whether Bitcoin is in a bubble, this substantial drop has many investors worrying that the bubble is about to burst. So does this drop spell the end of Bitcoin, or is it just a bump in the road?
The answer to this question depends largely on the short-term performance of Bitcoin. If Bitcoin is able to rally even a few hundred dollars over the next few days, it could be enough to ease investor fears. If the slide continues at all, though, it will likely be bad news for those invested in the cryptocurrency.
According to Coindesk’s analysis, Bitcoin needs to reach a price of $12,500 in order to prevent a selloff. If it does not reach this price, Coindesk predicts that Bitcoin could fall all the way down to $7,500. While $12,500 may not seem too far off, the price of Bitcoin has been dropping for several weeks now. Another week or two of declines or even doldrums certainly isn’t out of the question, and if this happens, there’s no telling how far the cryptocurrency could drop.
The trouble with Bitcoin is that you can’t put an intrinsic value on it. Unlike a company whose assets and profits provide it with value, the price of Bitcoin is determined solely by how much investors are willing to pay. Just a year ago, investors set the price of Bitcoin at under $1,000. A month ago, investors set the price at almost $20,000. Now, though, it looks like the cryptocurrency honeymoon phase may be wearing off, and if it is, the near future of Bitcoin could look very bleak.
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