Bitcoin Price Flashback
It may be 2017, but for Bitcoin (BTC) investors, it’s looking a lot like 2013. That’s when the Bitcoin price reached its all-time high then promptly crashed, collapsing by nearly 50% within a month. Thursday’s fall is a sight less calamitous, but the cryptocurrency did drop by $172.00, or about 15%, as it flirted with its all-time high in Wednesday trading.
Over the past three months, the Bitcoin price has skyrocketed, climbing by 85%, including 45% within December 2016 alone. The online currency had benefited from geopolitical instability and a flagging Chinese yuan. The yuan’s growing weakness compared to the U.S. dollar and the strict monetary controls imposed by the Chinese government made BTC an attractive option to Chinese citizens looking for a freer asset.
Chinese Bitcoin exchange Huobi accounts for nearly a quarter of the world’s Bitcoin trading. While they too see the parallels between Thursday’s drop and the collapse in 2013, they are more optimistic about the stability of the current state of the Bitcoin price.
“In 2013, when the price was 8,000 yuan, the weekly trading volume was 393,000 BTC, with an amplitude of the week up to 103%,” said a representative of Huobi. “The trading volume was very small. Today, bitcoin [prices] broke 8,000 yuan with 735m BTC trading volume, which is expected to double in a week.”(Source: “Bitcoin Freefall: Prices Drop Nearly $200 in 1 Hour,” CoinDesk, January 5, 2017.)
The Huobi representative added, “Current trading volume is 37x of that in 2013 and bitcoin price fluctuates 15.95%, which is much more stable than the year 2013.”
While the higher volume of trades speaks to the growth in Bitcoin’s popularity, that by no means guarantees a better outcome compared to 2013. The traditionally volatile Bitcoin price may rebound or it may continue to plummet but, at the very least, it won’t be surpassing its all-time high that it had edged around on Wednesday.
A final important note: on Thursday, the yuan experienced its biggest two-day rise since 2010, when that measure was first recorded. This undoubtedly played a part in Bitcoin’s fall. (Source: “Bitcoin is crashing,” Business Insider, January 5, 2017.)