Why Bitcoin is Falling in Price? History of BTC Price Fluctuations
Cryptocurrencies are highly volatile: unlike fiat
money, the digital tokens may lose their value dramatically or gain in price in
a matter of a day. With its ROI over 9000%, Bitcoin drops in price as seriously
as gains its value. What exactly Bitcoin price depends on, and why Bitcoin
dropped recently? Let’s find this out.
What causes BTC price drops and ups?
The Bitcoin exchange rate is affected by many things,
from the statements of famous businessmen to hacking cryptocurrency exchanges.
Let’s talk about some important factors that affect Bitcoin exchange rate
Unlike key fiat currencies, Bitcoin’s market
capitalization is very small. $125 bln (the capitalization of BTC in May 2018)
is almost eight times less than the capitalization of Apple alone. Therefore,
the course on the exchanges to a certain extent can be manipulated by large
coin holders. They can pump and dump the course. Pumping is an artificial
increase in the exchange rate, which contributes to the hype and massive buying
up of coins (which in turn increases the rate even more). At the peak of
trading, the “pumpers” are dumping: they
begin to sell their assets getting the maximum profit. The course is sharply
Good News – Bad News
Hype, informational background, advertising, opinions
of authoritative people or companies – all that also affects the demand for
Bitcoin, and therefore, its course. News about hacking of user funds or the
bankruptcy of exchanges traditionally lead to depreciation. Positive comments about Bitcoin
from the traditional financial sector, government regulators, or simply
reputable members of the community can encourage users to buy coins.
Since the beginning of 2018, the cryptocurrency seems
to have lost the general battle with the Chinese authorities. Given that China
is one of the largest cryptocurrency markets, and most of the Bitcoins are
mined by Chinese mining pools, the legal framework in which cryptocurrency
operates in the Middle Kingdom affects the exchange rate. So, the loyal
policies of Japan, Singapore, the relative crypto-friendliness of the European
Union and other countries have a positive effect on the course. But as soon as
we hear about new restrictions from China or South Korea – we should expect a
depreciation of the BTC.
Liquidity and Availability
Bitcoin has fewer problems with this than any other
cryptocurrency. The expansion of the network of trading platforms accepting
Bitcoin, the increase in the number of Bitcoin ATMs and other trends in the
mass adoption of Bitcoin as a means of payment, which we can observe today in
one form or another, will undoubtedly have a positive effect on the BTC rate.
Bitcoin is managed by consensus by users and miners;
there is no central authority. At the same time, the competent management of cryptocurrency
and the solution of its technical problems (for example, scalability problems)
is an extremely important matter. Also, Bitcoin forks (Bitcoin Cash, Bitcoin
Gold, etc.) affect the price of BTC.
The major Bitcoin drops
To see exactly why Bitcoin price is dropping, let’s
observe the most notorious cases.
2011: Hacking of Mt Gox
Bitcoin owes one of its first major drops to the
already closed Mt Gox exchange, which closed in 2014. However, back in 2011 it
flourished – it was then, on February 9, 2011, that Bitcoin first reached
parity with the US dollar and was valued at $ 1 per BTC on the Mt Gox exchange,
and its price continued to rise, reaching almost $32 by mid-June. However, on
June 19, 2011, after hacking Mt Gox, the price of cryptocurrency fell in a
matter of minutes to a few cents, and then recovered during a long time.
February 2012: Paxum
In less than a year, a new nuisance happened with
Bitcoin. After the exchange of Paxum refused to work with BTC on February 11,
2012, the price of cryptocurrency fell sharply by two dollars – now this figure
looks ridiculous, but then it amounted to a third of the price – the cost of
the coin after the fall was about $ 4.
March 2012: Linode
Just a few weeks after the Paxum story, on March 1,
2012, the price of Bitcoin, which had just begun to recover, fell again, this
time to $ 4.89 per BTC. This happened as a result of the massive theft of
cryptocurrency on the Linode exchange. Bitcoin’s total market capitalization
was then slightly less than $ 230,000.
August 2012: Pirateat40
The cryptocurrency price began to rise again, despite
the failures in the first quarter of 2012. However, in August, Bitcoin was
waiting for another collapse. After Trendon Shavers (Priate @ 40) stopped paying
BTC for the obligations of his “investment fund” Bitcoin Savings and
Trust, the price of cryptocurrency fell sharply by $3 and amounted to less than
$11 per BTC.
April 2013: DDos attack
Although 2012 was a difficult year for cryptocurrency,
the cost of BTC continued to grow steadily. But on April 10, 2013, the
cryptocurrency collapsed by $60 – the price for 1 BTC fluctuated around $ 122.
This happened after a message appeared about a DDos attack on the network.
October 2013: The arrest of Ross Ulbricht
The mysterious owner of Silk Road, who had been hiding
from the security services for more than two years, was arrested on October 7,
2013. The appearance of this news caused an instant collapse of the BTC rate
almost doubled – from $ 120 to $ 70 in an hour.
However, traders quickly appreciated the positive
aspect of the event – the collapse of the largest criminal empire with which
the cryptocurrency was associated. In less than a day, the price again rose
above $100, and the lower point of decline on this day became the minimum below
which Bitcoin has not dropped since then.
December 2013: Chinese ban
Bitcoin, which quickly recovered from the blow and
rose above $ 1,000 in November, was facing another test – at the end of 2013,
the People’s Bank of China banned BTC transactions for financial institutions,
which led to a natural drop in the price of cryptocurrency, which amounted to
more than $300 in a few days. Thanks to the Chinese ban, Bitcoin ended 2013 at
February 2014: Closing Mt.Gox
In February 2014, Bitcoin was waiting for several
troubles at once. It all started on the 7th, when the price of cryptocurrency
fell immediately to $100 after several large exchanges were subjected to DDoS
attacks. Then, after a heated debate between miners and developers, the subject
of which was the block size, the price of cryptocurrency fell again, this time
by $30. Well, the last winter month ended with a surprise from the Mt Gox
exchange, which on February 24 announced its closure, provoking a drop in the
price of BTC by $57. After that, the cost of BTC was about $550.
March 2014: Surprise from the Tax Service
On March 26, 2014, the United States Internal Revenue
Service (IRS) ranks Bitcoin as a type of property. This leads to a drop in the
price of cryptocurrency at $150. After the decision of the Tax Service, the cost
of one BTC was $453.
August 2015: Bitcoin XT Release
During 2015, the price of cryptocurrency continued to
fall, then rise, gradually decreasing, but there were no sharp changes in it
until August 19, 2015. That day, a $ 45 crash occurred due to the release of an
alternative Bitcoin XT client, the release of which was an attempt to solve the
problems of network scaling.
January 2016: Hearn Effect
In January 2016, Mike Hearn, a former Bitcoin Core
developer and one of the most famous Bitcoin devotees, announced a systemic
crisis in Bitcoin and blockchain, and predicted a cryptocurrency price crash.
The price after that really fell by $ 40, but with this the effect of Mike’s
statement ended. Soon, the price began to rise again.
August 2016: Hack of Bitfinex
After it became known that “unknown hackers”
stole almost 120,000 BTC from the Bitfinex exchange, Bitcoin crashed by $175. It
was the largest cryptocurrency robbery in the world since the collapse of
MtGox. However, Bitfinex was able to recover and recover, and in just six
months it was able to repay a significant portion of the debt to customers.
2017: China again
After the Bitfinex story, the value of cryptocurrency
continued to rise. However, at the very beginning of this year, namely on
January 5, the People’s Bank of China dealt a new blow. The cost of one Bitcoin
fell sharply by 31%, amounting to $ 889, after the NBK introduced another ban
related to the cryptocurrency turnover.
Despite the fact that the path to success for Bitcoin
remains difficult, the fact that cryptocurrency has passed so many tests proves
its viability and the presence of a large number of its adherents who continue
to believe in the triumph of cryptocurrency, despite periodic failures.
What about the last Bitcoin price drop?
The long sideways trend ended again with the collapse
of the cryptocurrency market. In September 2019, during one day, BTC fell by
almost 18%, touching the level below $ 8,000. Altcoins were experiencing a
“blood bath” too. Bitcoin Cash lost more than 22% per day, LTC – more than 15%.
Here’s a short overview:
What are the possible reasons of BTC price drop?
The current collapse of BTC is associated with the “buy by rumor, sell on the news” approach in the context of launching Bakkt deliverable futures.
Right before the launch of the platform, a hashrate in the Bitcoin network fell by 30%. Some attribute this to the disconnection of mining farms in Kyrgyzstan and Kazakhstan. In the first case – due to disconnection, in the second – due to blackout.
There are versions that such dramatic events took place due to the fact that investors did not see the massive growth of BTC after the launch of Bakkt and realizing that the price was too high, they began to get rid of the asset.
So why has Bitcoin dropped? The reasons will be
analyzed, however, with the highest probability, all factors played out at once.
During one day, the total cryptocurrency market capitalization collapsed by $
Why Bitcoin price is dropping from time to time? There’s a huge set of factors determining its cost. Since it is the world’s first cryptocurrency, it depends on a lot of things. But it’s clear that Bitcoin’s advantages outweigh all negative sides, that’s why it continues growing further despite all the fails.