Despite the frankly bizarre assumption from cryptocurrency acolytes that Bitcoin is just going to keep accruing value at an accelerating pace until every nerd on earth is a trillionaire, the much-vaunted digital currency has taken a substantial tumble overnight.
After hitting a record high of US$19,857 earlier in the week, it’s now sitting at $14,947. It went as low as $11,900 overnight. This insane oscillation in value has been par for the course for bitcoin – and indeed all cryptocurrencies – but this price correction is particularly large, and won’t do much to address concerns that bitcoin is fundamentally unstable.
Take a look at the week’s bitcoin value chart, courtesy of Xe. Lookin’ stable!
And it’s not just bitcoin that took a hit. All but two of the top 100 cryptocurrencies were significantly down this morning, including Ethereum and Litecoin, both of which have seen massive value increases over the past few months.
There was definitely a bit of panic in the market. In the midst of the collapse, Coinbase, one of the biggest markets for buying and selling bitcoin, announced that they would temporarily halt buying and selling on their platform.
“Due to today’s high traffic, buys and sells may be temporarily offline. We’re working on restoring full availability as soon as possible,” the site said. Functionality was restored a few hours later.
Despite the fact the cryptocurrency market is increasingly diverse, and there a shitload of so-called ‘altcoins’ (read: not bitcoin) to buy, it’s becoming quite clear that everything comes back to bitcoin. When it crashes, so too do they, and vice versa. Many investors – especially fresh ones who are just getting into crypto – are using bitcoin as a vector to invest in other currencies, so everything becomes enmeshed.
Of course, merely typing ‘bitcoin is a bubble’ online is instantly going to cause arguments, and social media is lit up with crypto fans insisting that this is all quite natural. But the writing could be on the wall.
40% of the bitcoin market is owned by about 1000 people, and anything they do sends massive ripples through the market. These so called ‘bitcoin whales’ naturally put you everyday investors at a substantial disadvantage because of their ability to collude behind the scenes – and we all know its the small fish who fry first when a system collapses.
Anyone who tells you they know exactly what is going to happen with bitcoin is talking out of their ass – we’re basically in uncharted territory. But these unstable price corrections might scare some small investors off investing in cryptocurrency. Let’s see how it goes.Image: Getty Images