With the recent crash, Bitcoin price has dropped 80 percent in less than a year. Around $700 billion disappeared from cryptocurrency markets. While miners and hodlers are being scorched, margin traders enjoy the volatility.
Over the weekend Bitcoin lost 8 percent and fell below the $4,000 level and stayed this way at the beginning of the week. Altcoins – including Ethereum and XRP – followed. Sine the record highs in January global cryptocurrency market capitalization shrunk by more than $700 billion.
A smart choice between short and long positions and trading with a high leverage can help mitigate the impact of falling crypto prices.
Where will it stop?
On standard markets, when stocks plummet, unless the company is apparently going bust, there’s always a moment to buy-low. Savvy investors can determine when the stock goes below the fundamental value of a corporation. Of course, there’s no such barrier for a cryptocurrency.
On one hand, crypto as a tech concept is sound and safe. Founded almost a decade ago Bitcoin has survived a long time. There’s nothing wrong with the network. So why is the price of Bitcoin falling?
Even if there is a consensus on the future of blockchain and there’s little chance that of the thousands of use cases of crypto none will work out nobody is able to stick a right price tag to any cryptocurrency. Bitcoin is a great solution for payments, but nobody knows what’s its market price – its just the effect of news, projections, and historic price movements. Fundamentals are untouched, but it’s impossible to find the intrinsic value of the cryptocurrency.
Bitcoin dropped heavily on the weekend, but surprisingly, large bullish investors still seem to keep away from crypto. A large move in could start a rally, but it’s difficult to say when it could happen. There seems to be too much uncertainty.
Miners are leaving the shafts
This is a tough time for people who invested in crypto mining. With time the venture became more and more competitive. In order had to buy high-performance computing equipment. Still, everything depends on the price of cryptocurrencies. With the recent market crash, many of the crypto suppliers are going out of business.
When mining crypto you use your computing power for solving the mathematical problem and generating hashes necessary to validate a crypto transaction. Miners present a proof-of-work to the network and get a share in the newly created cryptocurrency (Bitcoin).
With the recent Bitcoin crash, many people decided to stop mining. That is why the Bitcoin hash rate declined almost 25% from the all-time record in August, Blockchain.com data say. Some of the miners are looking for more valuable coins, but it’s difficult to find any promising altcoin in times when Bitcoin is losing value so quickly.
Fundstrat Global Advisors estimate that using top-notch mining hardware – Bitmain AntMiner S9 – the cost of mining one Bitcoin is around $7000. No wonder at a price below $4000.
There’s still hope, however. The decrease in hash power can result in a drop in the Bitcoin difficulty, which at some point can be beneficial to the ones that stay in business. But still, the price of the coin is the most critical factor.
If the trend continues, it may be bad news for the top mining hardware providers – Taiwan Semiconductor Manufacturing Co., Nvidia Corp., and mining-rig designing company Bitmain Technologies Ltd.
Is it a bursting bubble or an attack?
Looking at the scale of the crash the first thing that comes to mind is a bubble being burst. But experienced traders point out that the Bitcoin price behavior does not look like this.
They point out the crypto market may be under attack. As you can see the biggest drop happened from the mid-December to early February. The price stabilized then with a strong $6000-$7000 floors. Until recently it seemed unbreakable.
When risk may bring stability
For all the global community involved in cryptocurrency 2018 has been very hard so far, and it seems that December it’s going to no less turbulent. People that are all in crypto – especially with their time – should use their knowledge and try to capitalize on price drops and increased volatility.
When cryptocurrencies are losing long-term, you can always make up the difference with smart short positions.
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