The Reason behind the Crypto Crash

CryptoBlood bath

The volatile nature of cryptocurrencies like Bitcoin has been very prominent, with this week being a rough week too. It plunged at almost 50% of the peak it gained in 2017, with skeptics nodding their heads at signs of the bubble finally bursting.

However we have all witnessed before, cryptocurrencies fall, correct themselves and rise up even higher than before. In December 17th, 2017, Bitcoin was seen to rise to a peak of $19,783 with a fall afterward during the Christmas season which got investors wondering. Bitcoin eventually rose back to its peak level.

On the 17th of January, Wednesday Bitcoin prices fell way below $10,000 and even touching $9,200 which is 50% of the high from a month ago. Other cryptocurrencies such as Ripple and Ethereum were also seen to fall due to a loss of confidence in investors. The most important reason was the announcement by Bitconnect, a popular cryptocurrency trading website closing down due to operating a Ponzi scheme. Due to this concern, almost 90% of its value was withdrawn from its investors as fear of withdrawals not being able to be processed was floating around. The last time such a scene occurred it was the Mt. Gox cryptocurrency exchange issue, where it shuttered in 2014 losing almost all of its Bitcoins. This collapse took almost 2 years for Bitcoin to finally regain its momentum.

When looking at certain decision-making policies which are able to upturn the cryptocurrency market, South Korea is seen to make a major impact. South Korea’s top financial policymaker said on Tuesday that a crackdown on trading of cryptocurrencies was possible. The ‘Kimchi premium’, which is the extra price South Koreans pay to buy digital currency, is the strongest indicator of how the demand for cryptocurrencies is increasing by South Koreans. Last week the justice minister put the cryptocurrency traders in South Korea in panic by remarking that Bitcoin will be banned which resulted in major cryptocurrency sell-offs. This was quickly taken back by the presidential office and said that no final decision has been made.

Looking at the history and statistics mentioned, it can be seen that often during the second week of January prices of Bitcoin fall to low levels and bounce back right after performing pretty well throughout the year.

Bails‏ @iancbailey
Replying to @WhalePanda @bitFlyer
2015 – Low was Jan 15
2016 – Low was Jan 16
2017 – Low was Jan 12
2018 – Low ….
1:39 AM – 16 Jan 2018

Another important analysis is the demand and supply of Bitcoin and other cryptocurrencies. The supply of Bitcoin is now at the level of 80% utilization which means as demand increases and supply is decreasing the price of Bitcoin could rise very high.

Even skeptics who thought Cryptocurrency was a bubble, have finally come to terms with Cryptocurrency being an extremely important game changer. For example, JP Morgan chief executive Jamie Dimon had regretted calling Bitcoin a fraud and now fully believes in blockchain technology and the various cryptocurrencies.

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About the Author: BJ Hetherington

BJ is the lead editor of Crypto Post Gazette. Fluent in French and proficient in Spanish and Arabic, he focuses on mobile trends and tech innovations. BJ is a graduate of York University In Toronto. BJ was an early adopter of cryptocurrencies having bought 100 bitcoins in 2010. To contact BJ, just click here

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