3 Reasons Why Bitcoin May Never See $20,000 Again

3 Reasons Why Bitcoin May Never See $20,000 Again

In its earliest years, cryptocurrencies found an appeal amongst strong libertarians who sought a type of currency that was not under the control of centralized governments or major financial institutions. Just recently, it’s found an appeal amongst almost everyone who noticed its recent surges in value and massive media coverage.

But while cryptocurrency, and Bitcoin in particular, has risen in price considerably, there are good reasons why mass adoption hasn’t occurred. Before you go out and chase after the Bitcoin dream, keep in mind that the currency is still:

  • Highly volatile and thus not a recommended candidate for a stable income.
  • Not accepted everywhere. You can’t pay your taxes with it yet for example.
  • Heavily regulated and sometimes outright banned in various nations.
  • Possibly unsafe to use, as its security has not been thoroughly tested

And in recent months, the price of Bitcoin has taken a general fall from its peak in late 2017.

But why?

The Huge Influx of Bandwagon Adopters

Bitcoin has become so popular that the term has been embedded in the minds of the general public. News of various individuals earning billions off of the currency transpired, and, as a result, tons of investors driven by positive sentiment flooded the market in late 2017. This had a few major consequences:

  • Those same investors driven by emotion were also incredibly sensitive to fluctuations. Whenever the price fell greatly, they scattered.
  • The influx of December 2017 resulted in more Bitcoin deposits than withdrawal, which drives supply up much higher than demand. Consequently, the price became unsustainable.
  • Mining Bitcoin is now more expensive than ever. Even an $800 GPU struggles to produce a nontrivial profit nowadays when you factor in the power bill.

The Lack of Security

Since Bitcoin isn’t controlled by a central agency and trader identities are completely anonymous, very little can be done whenever a security issue does rise up. Just recently, popular South Korean cryptocurrency exchange service Bithumb was hacked, resulting in over $30 million dollars being stolen.

The price of the currency in the market fell accordingly, and since this incident wasn’t the first of its kind in recent months, it seems the issue of security will continue to be an obstacle in Bitcoin’s adoption.

The Scandals

Well before its heyday, Bitcoin held a notorious reputation as a popular tool for illicit online activities such as drug trades and the exchange of certain materials on the Deep Web.

But now, the Bitcoin scandals have shifted towards white-collar crime. Among other incidents:

  • In mid-2018, the U.S. Justice Department launched a criminal investigation into Bitcoin price manipulation by various traders. The threat of further regulation being placed on the cryptocurrency brought down its price.
  • Various rumors emerged when Tether, or specifically the Bitfinex Corporation that owns it, was alleged to have been artificially raising the price of Bitcoin. The ensuing scandal was dubbed a “bloodbath on the cryptocurrency prices” by UC Berkeley Computer Science professor Nicholas Weaver.

Advice for the Road

Investing in cryptocurrencies is exciting, but like anything in life, you need to take the time to learn the pros and cons of getting involved in such a volatile industry. There is a solid chance Bitcoin will continue to appreciate in the long-term. Still, that doesn’t mean it won’t experience violent drops over the short-term.

Whatever you decide, treat your crypto investments like any other investment. You need to go in with a plan and stick to it.

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Eric Carriere

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