The last few months of 2017 were a remarkable period for cryptocurrency investors as the value of Bitcoin soared to almost $20,000 after quadrupling in a matter of weeks. But the good times didn’t last very long and the price started to waver at the beginning of 2018 before collapsing altogether in a ‘bloodbath’. Now it’s sitting at a dismal low of less than $5,000.
Experts are split on whether this is a good opportunity, offering people the chance to buy cheap and then cash in as the price rises, or a disastrous crypto-crunch. Mati Greenspan, analyst at global multi-asset investment platform eToro, said: ‘What we’re seeing now are the after-effects of the unprecedented rise of Bitcoin and other cryptoassets seen in 2017. This year is simply a retracement of that. ‘The same is happening in broader markets as well where tech stocks, for example, are following a similar pattern. As with all markets, if prices reach levels that are higher than can be justified they need to pull back. These cycles can sometimes be accentuated in the crypto market due to the riskier nature of this nascent industry. ‘In the same way previous cycles have not signalled the end for broader markets, these price movements don’t signal the end for cryptoassets. We’re still very much at the beginning of the crypto journey. At this stage, volatility is to be expected.’
Activity on the markets has slowed quite dramatically. Last year, roughly $2.1 billion worth of Bitcoin trades were being traded every day, according to Bloomberg. Now that figure has plunged as low as $350 million. This could indicate that its price is going to drop even further. One famously optimistic expert has radically altered his analysis of Bitcoin’s prospects amid the current slump. Tom Lee, co-founder of Fundstrat Global Advisors, previously believed that Bitcoin would soar to $25,000 by the end of the year. But he’s just radically cut back his predictions and told investors that it would reach just $15,000 – which is some way off the peak of almost $20,000 that the virtual coin hit at the end of last year. ‘While Bitcoin broke below that psychologically important $6,000, this has lead to a renewed wave of pessimism,’ Lee said in a briefing note, according to CNBC. ‘But we believe the negative swing in sentiment is much worse than the fundamental implications.’