Why the Bitcoin Price Drop is Nothing To Panic About

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There is simply not getting away from the fact that Bitcoin’s fortunes have wilted in recent days. Plunging more than 30%, the digital currency has hit a rocky patch to say the least, something that the mainstream media has been quick to jump all over. Labelling Bitcoin as a “bubble” and criticizing the cryptocurrency – almost unfairly so – it appears that many are preparing themselves for the worst-case scenario. But, would a deeper dip into the red be all that bad over the long-term? Many think not, as Bitcoin is effectively in its formative years, so this drop could be seen as a correction, effectively establishing a new foundation for Bitcoin moving forward.

Bitcoin Cash brings trouble

As the price of Bitcoin has dropped, most have scrambled to figure out why, but there really isn’t an obvious answer. The main reason why people are saying that Bitcoin has tumbled is that investors have moved in mass to cash out on Bitcoin’s rise. While there will be some that have rushed to ditch Bitcoin for fiat currency in the wake of the Bitcoin boom, there probably hasn’t been enough of a shift to dent the market to this an extent.
So, if the need for fast cash isn’t the reason, you need to look at the cryptocurrency market as a whole, as it can be strongly argued that there has been an oversaturation of altcoins crashing the scene and becoming tradable. XRP, ETH, LTC, DASH, and – most importantly – BCH, all of these coins have encroached on Bitcoin’s turf, ripping attention away from the world’s premiere cryptocurrency. BCH specifically has ruffled Bitcoin’s feathers, as the controversial cryptos arrival at Coinbase took the shine off Bitcoin, causing a quick 12% drop to occur, pushing it below the $17,000 mark.

Just par for the course

Countless claims have been made about why Bitcoin has dipped, but there is something that many have ignored – the possibility that this is simply part of the Bitcoin journey. According to some, the drop in price could potentially hit the 50% mark, but it is by no means the end of the world for Bitcoin should it do so. Looking at its age from a strictly functional currency standpoint, Bitcoin is still in its formative stages, with the same applying to every other cryptocurrency out there as well. Effectively, Bitcoin is a multi-decade cryptocurrency that isn’t going to peak anytime soon, nor will it reach its maximum potential for years, so there will plenty of ups and downs between now and then.

A lesson from history

Those new to Bitcoin might not be aware of the fact that it has crashed before – arguably in more extreme circumstances – and has always come back stronger than ever. Looking back, 2014 was probably the most troublesome year in the history of Bitcoin, as it was hit by widespread DDOS attacks, heated block size debates, the closure of Mt. Gox, and the IRS declaration of Bitcoin as property. Throughout the year the dips just kept coming. The most recent “big” drop in Bitcoin price – outside of what has just occurred – is when Chinese officials first discussed restrictions on Bitcoin transactions, resulting in a 31% drop. What you can take away from this is that Bitcoin has faced its fair share of knocks over the years, but it has never been kept down for long.

An expert’s opinion

It’s certainly worth listening to the experts in the field that have commented on the Bitcoin drop. Dan Morehead, the former Goldman Sachs mortgage-backed security trader and current Pantera Capital CEO was quick to quash bubble fears during his appearance on CNBC’s Squawk Box. He said, “[Bitcoin] could be down 50% next week, where it was a month ago, but in a year it’ll be much higher than it is today.” With others raising doubts over Bitcoin, Moorehead remains optimistic, “If you add up all the different use cases, it’s a payment rail, like a digital gold, and a way to get round correspondent banking, you come up with a number that’s an order of magnitude, or two higher than today’s price.” Finally, he stated his true belief that Bitcoin is only just getting started, “For the big blockchains like Bitcoin, Ethereum, and Ripple, we’re in the first innings of a multi-decade thing, and there’s going to be some ups and there’s going to be some downs, but we’re still really early.”

No need to panic!

A selection of cumulative elements has hit Bitcoin hard, but where it can be argued that a price correction was due, the obituaries of Bitcoin couldn’t be more wide of the mark. Large sell-offs, regulation questions, altcoin adoption, and various other factors will always impact Bitcoin’s value, but this doesn’t mean that anyone should rush to hit the panic button. 2017 – with the launch of Bitcoin futures and rumoured ETF developments – has still been an astounding year for the cryptocurrency in spite of late December dip. Expect Bitcoin to bounce back sooner rather than later – possibly even before 2018 – as all the evidence points to this current price drop being nothing to panic over.