Bitcoin and the cryptocurrency represent a brand new market when compared to the traditional assets. As an example, only at the end of 2017 started the trading of futures contracts and just in two American exchanges, with the first expiring in January 2018. For comparison, the traditional futures market is more than 300 years old, dated the beginning of 1700.
Being a young market, it is still very susceptible to the news. In the last three weeks, I have seen a steady and growing number of unfavorable news. In addition to the well-known “Bitcoin is dead,” which is news since 2010, we have news announcing the ban on cryptocurrency by India (misunderstood news, since the Indian finance minister spoke on regulating, not banning). Even on a new ban on China (reprints of September news about a ban, which has already is reversed). It is worth mentioning that since its inception Bitcoin has already “died” more than 249 times.
Another point for analysis is that because it is a non-regulated market, manipulations of price by big players end up being familiar.
We also had news about the “Dollar Tether,” a token that serves as a reference for transactions between exchanges and that would have its price based on the dollar price. There is an SEC investigation into the alleged $ 2 billion issue of “Tethers” and what is speculated is that the high end of 2017 was due to the uncontrolled issuance of these tokens, serving as the capital for a fictitious increase in demand. This theory, however, does not seem to make much sense, considering that we have had a total appreciation in market size of more than $ 300 billion. It would be like thinking that a buyer with $ 10 million would be able to inflate real estate prices in a city like San Francisco.
Today’s media (Feb 5th) was that three US banks and one English bank (JP Morgan, Bank of America, Citigroup and Lloyds Banking) banned the purchase of cryptocurrency with credit cards. The justification of the banks is to avoid the indebtedness of the clients.
Given the low rates of credits in this countries, users were leverage to invest in cryptocurrency using the low-interest rates of banks. In practice, in a bullish market, this operation was highly profitable for customers and risky for banks. I do not understand that this attitude could exert possible influence for the market itself since the percentage of users using such operations is small compared to the market.
Even though it valued more than 700% since January 2017 (considering the current quotation of $ 7300), a drop of almost 20% in less than 24 hours scares. If we find the top of December of 2017 of $ 19,800, a fall that represents 63%, according to Image 01.
In analyzing the Bitcoin chart since its inception, however (Image 02), we can see that abrupt and “painful” falls are common occurrences for those who are in the cryptocurrency market for a few years.
Abrupt movements, often orchestrated by big players, are times when beginning investors end up making losses because they do not understand the dynamics of this market. If we use technical analysis, an important price support point would be around $ 5500. It means that, in a downturn scenario, there is a tendency for price to find support in this region and to stabilize.
It is essential, however, to take extra care in these periods and to follow the evolution of price and market volume.
Analyzing this scenario, I leave a piece of advice to anyone who wants to invest in cryptocurrency. Start spending the time to understand the technology and the market. Bitcoin is a product of a technology called DLT and this technology, according to Steve Wozniak, Bill Gates and other visionaries have the potential to transform the world as we know it.
Once you understand the technology and its potential, be ready to invest your capital, keeping in mind that it is a volatile and high-risk market and that there are no guaranteed returns.
Bottom line: no, it’s not the end of Bitcoin yet, the sky is the limit! HODL!