What´s Caused the Sudden Drop in the Price of Bitcoin?

BitcoinThe price of Bitcoin against the dollar has fallen significantly in recent days, and analysts are queuing up to explain why and what the likely outcome will be.

For the last few months, the price of Bitcoin has remained uncharacteristically steady at around $6,500. However, since last weekend, the cryptocurrency has lost another 33 percent of its dollar value and this morning was trading at around $3,650. This represents a major loss for Bitcoin investors – especially those who purchased the cryptocurrency at its all-time high of $19,783 last December.

Bitcoin Price Drop in November 2018
Bitcoin Price Drop – November 2018

Bitcoin is not unique in suffering a significant decline in its dollar value. Practically every other cryptocurrency has mirrored Bitcoin´s dramatic slide, and analysts are queuing up to explain the cause of this phenomenon and speculate about what might happen next. The conclusion is that nobody knows for sure why Bitcoin appears to be falling over a cliff, or whether it will recover.

Pick a Reason, Any Reason

Plenty of reasons have been suggested for the drop in the price of Bitcoin. Some analysts blame the recent Bitcoin Cash fork, others claim the price was being artificially inflated all the time, and the “glass-half-full” brigade attribute the decline to regulatory action being taken by the Security and Exchange Commission. It has also been suggested investors are selling cryptocurrencies to pay their tax bills.

A more reasonable explanation is that many traders are believed to have had a stop-loss benchmark of $6,000; and, when the price of Bitcoin fell to that level naturally, it initiated an automatic sell-off. The effect of sell-off may have been exaggerated by any of the other factors mentioned above, although it is more likely that secondary stop-loss benchmarks existed at the price points of $5,500 and $5,000.

So, What Will Happen Next?

Opinions vary between this is the end of Bitcoin as we know it, and the price will bounce back to a higher level than was seen last December. The likely outcome is somewhere in between as opportunists dive in to snap up Bitcoin while its price is cheap. Analysts differ in their opinions as to where this price point may be – some quoting $3,000 while others suggest a further fall to around $1,200 is required.

It may be the case opportunists are gathering already. Investors who bought Bitcoin at $6,500 and sold at $6,000 when the stop-loss benchmark was triggered, will be looking for ways to recover their losses. If Bitcoin was considered a good investment at $6,500, it makes sense to purchase the cryptocurrency at the lower price, and there could be a small recovery in price as soon as next week.

How the Volatility Affects Poker Players

In most cases volatility in the price of Bitcoin makes no difference to poker players. Deposits made at the better Bitcoin poker sites are converted into dollars at the current exchange rate and balances are maintained in dollars. When withdrawals are requested in Bitcoin, the original exchange rate is disregarded and the rate at the time of the withdrawal request is applied.

Therefore, if a player funded his or her account with 0.1 BTC when the value of Bitcoin was $6,500, their account will have been credited with $650. If the player subsequently wants to withdraw their $650 in Bitcoin when the price has fallen to $3,250, they will receive 0.2 BTC. So, even though a Bitcoin is worth less in dollar terms, the player has more of them. It all balances out in the end.

Only if players are hoarding Bitcoin in an online wallet or are playing at a Bitcoin-exclusive poker site like SWC Poker, will they notice any difference to the overall worth of their Bitcoin. At present, these players are not having a very good time, but that could all change by Christmas – as it did last year when the price of Bitcoin rose from $8,225 on November 25th to $14,103 on December 25th.

Bitcoin Price Chart December 2017
Bitcoin almost doubled in December 2017
Jacqueline Packett
Jacqueline Packett