Bitcoin Falls Below $4000 This Morning (Monday, Nov. 26, 2018), As Crypto-Currency Collapse Worsens

Bitcoin Falls Below $4000 This Morning (Monday, Nov. 26, 2018), As Crypto-Currency Collapse Worsens

     “It’s getting worse” the Wall Street Journal notes in this morning’s (Nov. 26, 2018) publication, Steven Russolilo writes, “Bitcoin just had the week from hell. The crypto-currency plunged below $4000 over the [Thanksgiving] weekend, (trading this morning down $83 to $3,297 per coin as I write this). That means,” he adds, “bitcoin has lost a third of its value in just the past seven days, one of its worst weekly selloffs on record. Bitcoin has now fallen about 80 percent from its 2017 high of $20,000 per coin.”

     Tony Gu, Founding Partner at NEO Global Capital told the WSJ that “the rout was down to just one thing……panic.” 

     The reasons for the selloff are many. The retail investor is virtually non-existent, 90 percent of the digital currency is held by one percent of the investors meaning manipulation is always a concern — especially in an unregulated environment — and even the speculators and frequent traders are moving on to other trades. “Now, another worry has emerged,” Mr. Russolilo writes: “Crypto-currency miners, the outfits that solve complex equations to generate new digital coins, seem to be losing interest. The amount of computing effort expended by miners, known as the hash rate, has started falling.”

     As Mr. Russolio explained, “the hash rate rose most of the year [2018], even as crypto-currency prices slumped, suggesting people remained optimistic prices would bounce back. But, it [hash rate] has fallen sharply in recent weeks,” according to Blockchain Ltd.a crypto-currency-wallet service data firm – – that suggests fewer miners are jumping into the network.”

     “Bitcoin’s value is always driven by intensity of the demand and supply,” said Edith Yeung, a partner at 500 Startups, an early-stage venture fund. “If the miners stop mining, bitcoin will not function…..and the overall market will lose confidence. If there is no confidence, people will freak out and sell even more.”

     “Rival digital currencies such as Ripple, and Ether, have also fallen sharply,” Mr, Russolio noted; and, as I have written previously on this blog. “The total market value of crypto-currencies stands at about $130B, down from a record high of $800B in January,” according to the [digital currency] research site, CoinMarketCap.Mr. Gu, “whose blockchain investment fund in Singapore manages about $400 million in assets, is optimistic that the [bitcoin] market will recover,” Mr. Russolio wrote.

     “Money is made when there is blood in the streets,” Mr. Gu said. “But, others say more pain is ahead. “It’s hard to look at the price charts of the big crypto assets and not cringe,” said Fred Wilson, a partner at Union Square Ventures in New York, and an early bitcoin investor wrote on his blog. He drew a parallel to the moves seen when the tech bubble burst in the late 1990s.”

     I do believe that cyrpto-currencies is the long-term future of financial transactions; but, we are in the Model-T era, and it is going to take a while for the currency to legitimize and prove its worth and benefits to a much broader audience. Even with that said, it is hard to imagine Bitcoin ever reaching anywhere near the heights it once achieved. In the meantime, bitcoin remains in a bear-hug; and, more pain is likely ahead. Just one man’s opinion. RCP,

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