Losing nearly 30% of its worth in just two days, Some analysts have called this as profit-taking, which would imply the declines will level off. But technical analysts expressing to CNBC say the losses could go as low as 46.5%, pushing Bitcoin down to $1,470.
A look at past suggests even that might not be the floor. The cryptocurrency rally of the last six months is completely reminiscent of a Bitcoin bump that unfolded from October to December of 2013 when the price skyrocketed from below $130 to over $1100. That was followed not just by a correction, but by a long, slow decline that had prices pared back to just over $200 within a year, followed by two years of uniformly but slow growth.
It’s unlikely that the same specific pattern will replicate itself, mostly because the ecosystem of startups and services investing cryptocurrency is vastly more robust now than it was four years ago. But an important lesson still holds: cryptocurrency prices are volatile because very few theorists actually understand the technology or its potential, leaving it vulnerable to reactive, emotion-driven swings.
For proof, just look at how closely various cryptocurrency tokens’ prices are following each other, regardless of their often very different actualities on the ground. Bitcoin is the first and most basic form of cryptocurrency, with a lot of adoption and security, but relatively few features. Ethereum is a robust ‘smart’ system that is already being widely utilized for building complex data-sharing applications. And Ripple is a mostly privately-held solution concentrated on interbank transfers. Yet the three tokens’ charts for the last few months are remarkably similar.
That suggests very little close analysis by those buying into cryptocurrency.
The fundamental reason for these extensive price swings is that the promise of blockchain tech is simultaneously so profound and yet so far from the success. Even if one accepts the idea that blockchains will someday underly everything from health records to insurance, the road to overhauling those systems will be long and winding.
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