This piece is a compilation of what price slump is and has a trajectory of price fluctuations in the crypto market with bitcoin taking centre stage. For a person who may not know, Bitcoin is a cryptocurrency. It is a type of decentralized electronic cash that can be sent from user to user on the peer-to-peer Bitcoin network without a central bank, single administrator or the need for intermediaries.
Bitcoin is usually referred to as the ‘gold’ of cryptocurrencies. It was the first model digital asset to be created in 2009 and traded in the crypto exchange market. Bitcoin became a trend-setter for other developers to fashion their own forms of cryptos and the list has been growing endlessly since then.
In a geographical slump, a coherent mass of loosely consolidated materials or rock layers moves a short distance down a slope and then mass wasting then occurs. A slump in the health field indicates a collapse, or to fall or slide down suddenly. A price slump is not any different. A slump in price connotes a sharp decline in trade or market values and/or business activities. Slump is a slang that is flexible enough to describe both a short, sharp decline and slow, prolonged low value or activity period.
In the case of the tradition Legal Tender, factors like monetary policy, inflation rates, and economic growth measurements are some common factors that usually influence the value of a currency. These are not the same in the case of a cryptocurrency. The understanding of why the price of bitcoin goes up or down could be confusing, but identifying factors is a step in the right direction. The following can influence the bitcoin value: the exchanges it is traded on, the market demand for it and supply of it, the internal governance, and the number of competing cryptocurrencies amongst other things.
According to Investopedia’s Brent Radcliffe, “The supply of bitcoin is impacted two different ways. First, the bitcoin protocol allows new bitcoins to be created at a fixed rate. New bitcoins are introduced into the market when Miners process blocks of transactions and the rate at which new coins are introduced is designed to slow over time: growth has slowed from 9.8% (2015) to 6.9% (2016) to 4.3% (2017). This can create a scenario in which the demand for bitcoins increases at a faster rate than the supply increases, which can drive up the price.
The second way that supply is impacted is by the number of bitcoins that the system allows existing. This number is capped at 21 million, meaning that once this number is reached, mining activities will no longer create new bitcoin. At this point, mining activities are likely to be supported by transaction fees. The supply of bitcoin reached 16.8 million in late January 2017, representing 80% of the supply of bitcoin that will ultimately be made available.”
It is not totally impossible to have cryptocurrency prices fixed for a long period with relevant factors being equal. But the regular changes in surrounding factors cause price movements whether in upward or downward directions.
For a long while before January 2017, the ‘Gold crypto’ had gone through many price corrections before getting a significant upward movement in price and by mid-December 2017 it reached an all-time high of about $19,700. The major slump in 2017 was referred to as a crisis, its price had slumped 80% that year, wiping about US$700-billion off cryptocurrency markets. In actual figures, the price fell from almost $19 000 to about $7 000, all this between December 2017 and February 2018. The news transcended into showing that bitcoin had been in a prolonged downward spiral throughout the start of 2018 which was the case. There was a $6 000-to-$7 000 range that seemed unbreakable for the better part of 2018 and by December in the same year bitcoin began trading at about $3400. Bitcoin and other cryptocurrencies have definitely taken their hits in 2018. It is notable that when bitcoin takes a hit, altcoins (other cryptocurrencies) are directly or indirectly affected. A Crypto Index, that tracks some cryptocurrencies (Bitcoin, Ethereum, Monero, Ripple, and Zcash) had plunged 85% from a January peak. A report from CoinMarketCap said there was a combined market capitalization of the over 2,000 crypto coins and tokens trading that amounted to $110.8 billion in December 2018, against a peak of about $822 billion in January that year that’s a big downturn.
It must be a common wonder by now as to why crypto prices have fallen. According to experts, reports of scams, Uncertainty over potential regulation, and several other factors may have reduced investor interest consequently slowing down cryptocurrency trading. The speculative frenzy that fuelled the cryptocurrency rally in recent years (BTC rose from under $1,000 in January 2017 to over $19,000 by the end of that year) pushed prices above levels justified by any economic or market fundamentals.
The most recent uprise of the bitcoin currency was about a week ago in 2019 when the bitcoin moved upwards to $5600 finally breaking through the $4,000 mark. The mark is seen as a key market resistance level since it was broken, Bitcoin surged upwards. Within two hours of trading early last week it reached a high of just over $5,000, according to charts from Tradingview.
Going from the recent ups and downs in the price levels of bitcoin and other cryptos at large, the market has experienced some strain in the slump periods. One way or another the first major price slump since the past few years affected the value of the currency and only another major surge can offer a chivalric boost that is needed. Top management and parties involved in big decisions for the market are most steadily on their toes to ensure the currencies have growing demands and the value increases. Final decisions that are made and strategies implemented will go a long way to reduce fluctuations and prevent further slump or any other prolonged slump from recurring. However, the investment market is usually a venture full of risks.
Credits – Techcentral, The Ticker tape, Osato Avan-Nomayo, Investopedia, Longman, Coinratecap.JOIN OUR COMMUNITY