There is no dull moment in the cryptocurrency space. Earlier this week, the price of Bitcoin touched an all-time high of $3000, while Ethereum crossed $400. This phenomenal rise in the price of Bitcoin, Ethereum and the other virtual currencies added about $15 billion to the overall market capitalization that had already hit $100 billion.
Then came a precipitous fall. Although the cryptocurrency space is familiar with such volatility, understanding the reasons behind a fall in prices is always crucial.
According to coindesk data, Bitcoin’s price (BTC) peaked at $3017.78 on June 12. However, the price soon fell to around the $2600 level but corrected and moved in the range of $2700-$2800 levels. The price started to slide again on June 14, eventually hitting a low at $2207.77 on June 15, a drop of around 27% from the week’s high. Ethereum (ETH) breached the $400 mark on June 13, however it dropped to $315 over the next two days.
The correction mechanism worked across all cryptocurrencies, not just Bitcoin and Ethereum. Ripple (XRP) hit a high of $0.3075, but was down to $0.2435. Ripple had touched $0.4056 in May, as per data from coinmarketcap.com.
Although this isn’t a cause for immediate concern, a bill titled as “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017” that was introduced in the Senate on May 25, 2017 may be making investors nervous. The bill talks about including digital currencies within the category of monetary instruments in order to increase regulatory oversight.
Other factors affecting the price of bitcoin are profit-booking, cyberattacks on two Bitcoin exchanges, and the heated debate on Bitcoin’s block size scaling issue. Cryptocurrencies, like other assets, are subject to profit-booking. With Bitcoin and altcoins touching new highs, some amount of profit-booking is expected. Meanwhile, Bitfinex, a leading Bitcoin exchange in Hong Kong was reportedly under a DDoS attack. It shared the information by tweeting on June 13. A similar situation was seen in early June with BTC-e.
The crucial debate on Bitcoin’s scaling issue is heating up. While SegWit2x mentions July 21 as the day scheduled for its signaling to begin. BIP148, another scaling solution, will be triggered on August 1, 2017. To add to the uncertainty, BITMAIN, a company co-founded by advocator of Bitcoin Unlimited Jihan Wu, has recently published a blog which says, “BIP148 is very dangerous for exchanges and other business.”
Sandeep Goenka, co-founder, Zebpay said, “I expect prices to be volatile till there’s a clear SegWit consensus or till about a week post August 1, when user activated soft fork (UASF) gets activated. When the dust settles, three possible scenarios can emerge: Number one, UASF gets activated in which case I expect a major Bitcoin price rally.
Number two, UASF dies, current Bitcoin chain continues as it is. In this case, prices should be around current levels and continue its long term upward movement with short to medium term volatility. Number three, Bitcoin splits in two chains. This is very unlikely but possible.
If this happens, it’s very difficult to predict prices of the two different coins and there will be very high volatility. I believe the chances of 1 and 2 happening are far greater and so I am optimistic.”
While it is widely believed that some correction is healthy within the cryptocurrency space, it seems that till August 1, 2017 we will witness a lot of news on the scaling issue which will affect Bitcoin’s price.
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