Cryptocurrencies have never established a reputation for stability. That said, even hardened investors were caught off guard with the recent decline in the bitcoin price. After making another seemingly convincing run to $7,000 and beyond, the bears struck down the rally.
That in itself isn’t surprising. What really raised eyebrows, though, was the combination of speed and magnitude. In less than a 24-hour period, the bitcoin price gave up nearly $1,000. Furthermore, we didn’t see a bounce-back in market value as is typical for the blockchain markets. Instead, the bitcoin price merely stabilized at its new low.
Understandably, the technical charts for bitcoin and other cryptocurrencies are disappointing. I’m not one of those folks who necessarily rejoice at a deflated bitcoin price. At some point, your profits need to rise in value. Otherwise, what’s the point of investing in the first place?
Still, I’m a realist. Given recent news items, I think we can expect cryptocurrencies to remain deflated for quite some time.
Fundamental Headwinds Impacting the Bitcoin Price
Before we dive in, let me just clarify one point: I’m net bullish on cryptocurrencies and most things blockchain. The current market volatility does not impact my longer-term views. I’m confident that the bitcoin price will return to five digits. Over the next several years, I wouldn’t be shocked at six-digit levels.
But in the present juncture, the bears control the sector. Personally, I’m not jumping on every dip and curve, anticipating that this time is “go” time. Institutions with deep pockets have vested interests in seeing the bitcoin price at certain levels at specific periods. To fight against this reality is pure folly.
Instead, I’m going to patiently wait out this lull, and make strategic acquisitions during this quiet phase. More importantly, I don’t feel the pressure to buy right now, or before some supposedly bullish event. Those who missed the boat earlier will have a chance to acquire cryptocurrencies at discounted prices.
Primarily, we’re facing several events that are inherently negative towards the bitcoin price. Recently, a Reddit user reported multiple transactions involving bitcoins related to the Silk Road scandal. Apparently, nefarious agents have transferred these tokens across multiple exchanges for cash-conversion purposes.
Second, cryptocurrencies experienced volatility due to the Mt.Gox settlement case. This is an ongoing matter, with Japanese prosecutors set to sell off more bitcoins to restore creditors. Essentially, for every positive news item that could spark a rally in the bitcoin price, persistent headwinds remain.
As a takeaway, I wouldn’t get dejected over the market volatility. Consider it a time to acquire positions at generous valuations. On the same token, don’t expect immediate profitability on your money. We could be in this lull for a while.