From ardent blockchain advocates to the average Joe on Main Street, seemingly everyone has the same question: what is with the recent bitcoin crash? Just a week ago, shares were trading a few hundred dollars south of $9,000. Suddenly, over the last 48 hours, bitcoin prices plunged from $8,000 to around $7,600.
For those that are keeping count, we’re now at a six-month low for the flagship blockchain reward token. Not surprisingly, most other cryptocurrencies have also suffered steep losses, suggesting that we’re transitioning back to a bear market.
Even more unsettling than the valuation loss, though, is the lack of clarity regarding causation. None of the blockchain experts have forwarded a confident explanation of this bitcoin crash. However, the consensus warning is that more losses could follow.
No kidding. When it rains, it pours. And in the virtual currency markets, few reliable hedges exist. While blockchain experts are quick to dive into the granular differences between bitcoin, ethereum and other major tokens, at the end of the day, they largely trade in lock step.
That’s wonderful for bullish phases. But in moments like this bitcoin crash, it could put a damper on your day. After all, despite what the “HODL-ers” say, your main goal is to cash out at some point.
An Ironic Catalyst for the Bitcoin Crash
Still, I’d like to take a crack at offering my own theory about the bitcoin crash. Ironically, the reason for the present decline could be the cryptocurrency platform’s astounding popularity.
Earlier this month, China apparently gave a tip of the hat to bitcoin. In a state-run newspaper, a Chinese writer hailed bitcoin as the first successful application of the blockchain. Additionally, rumors abound that China will launch its own official cryptocurrency. It’s an about-face, especially since China previously cracked down aggressively on crypto usage.
Naturally, such news boosted sentiment for all virtual currencies. However, that olive branch may not have been genuine. Recent reports indicate that the Chinese government continues to stymie efforts of blockchain integration in their country.
So, what gives? I think China’s positive enthusiasm is nothing more than fake news. To be completely blunt, administrations that rule with an iron fist have zero intention of ceding power. Instead, they want to consolidate it under their vice grip.
Thus, when investors discovered that the Chinese were being deceptive – when are they ever transparent? – the virtual markets’ valuation fell.
Indeed, China is no friend to the blockchain. One of the main reasons why cryptocurrencies are so popular is because they de-lever control from globalist central banks. But what China seeks is more control, not less. This clash of opposing ideologies probably contributed to the market volatility.