It seems the King of Crypto is up to its old, volatile ways again, dropping to its lowest price in a month at the beginning of September when it hit $43,050. And while it certainly doesn’t take an expert to look at a Bitcoin price chart to know that this is typical for such crypto, this time around there were a number of new factors at play that could have precipitated the sudden fall.
The biggest shock was the shock value itself, as for almost two months prior to the September plummet the cryptocurrency market, in general, was on a rally but, as you’re about to read, the enthusiasm for cryptos like Bitcoin may have actually backfired, sending popular cryptos from fleeting highs to flagging lows.
Did Bitcoin Get Too Popular?
According to Mike Novogratz, a well-known figure in the crypto world and CEO of Galaxy Investment Partners, Bitcoin’s 17% drop came down to too much popularity at one time. On one hand, a wave of individual investors has been piggybacking on the gaining trend that sees large institutions entering the crypto world, boosting Bitcoin’s interest and popularity. Three of the latest include Amazon, which has gotten its own share of press with recent job postings for various blockchain and digital currency roles, American retail giant Walmart, which posted a similar job opportunity, and Visa, which purchased a Non-Fungible Token for $150K.
Essentially, Bitcoin is being recognized for its many capabilities that go beyond trading opportunities. “There’s been a giant realization that crypto is not just Bitcoin being bought as a hedge against bad monetary and fiscal policy. More importantly, it’s the web 3.0,” Novogratz said. “I think we just got too excited and this was a little air being popped out of the balloon.”
Bitcoin Faces Challenges in El Salvador
Let’s not forget that September was also the month that Bitcoin was launched in El Salvador as legal tender—an unprecedented move in the history of cryptocurrency that didn’t go as smoothly as planned. The original plan was to provide every citizen who signed up for the Salvadorian government’s Chivo Bitcoin wallet with $30 to get a head start in using the digital currency to make purchases. However, within minutes the system was hit with tech glitches, forcing the government to temporarily shut down Chivo, a move that had a knock-on effect on Bitcoin prices, which fell 17% in a short time afterwards.
According to Carsten Sorenson, a researcher at LSE, the impact on Bitcoin prices was hardly surprising, as the world had its eye on El Salvador as a test run for the future of cryptos like Bitcoin. Sorenson called the initiative a “stunt,” saying “When individual countries seek to overnight make it legal tender, then the network will easily suffer as there already are issues with the transaction rate.”
Can the Damage be Fixed?
According to Bloomberg, El Salvador’s failure to launch won’t be very encouraging for the wider acceptance of Bitcoin as legal tender worldwide, however Novogratz has higher hopes. “I guess the real question is, come back in six weeks or 12 weeks and let’s talk about how it’s working for the people of El Salvador and for the system itself,” he said, adding, “Doing things at scale is not easy. I have a lot of faith that they will get this right.”
The Future of Bitcoin
Here’s the thing about Bitcoin, and all cryptos in general: they’re volatile. “Volatility is as old as the hills, and it’s not going anywhere,” said Bill Noble, Chief Technical Analyst at Token Metrics, adding, “It’s something you have to deal with.” But let’s also not forget that there is a world beyond Bitcoin. Just look at the number of so-called altcoins that have gained popularity over the past year, including Dogecoin, Cardano, Binance, Polkadot and Luna. Take an altcoin like Cardano, considered a “green cryptocurrency” because it doesn’t require as much energy to be mined or processed. According to Nigel Green of London’s DeVere Group, Cardano is one altcoin to watch, owing to the fact that it tends to latch on to movements in the wider crypto market, and an imminent upgrade to its network could position the altcoin to challenge heavy hitter Ethereum in the coming months, perhaps even hitting an all-time high.
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