With the latest cryptocurrency price crash, Bitcoin (BTC), the most preeminent cryptocurrency, could potentially go below $4,000 USD. Sadly, there is no end whatsoever in sight. As expected, scores of cryptocurrency analysts are suggesting various reasons for the crashing of the cryptos.
Indeed, the most popular narratives that these analysts are peddling are the hash war over Bitcoin Cash (BCH) and U.S. investment regulator crackdowns. However, a study gives an entirely different perspective on the subject.
Cause for the crashing crypto prices
According to the Chainalysis study, Bitcoin payments have shriveled over the course of the year, which is an indication that the cryptocurrency bubble has burst. This contributed heavily to the crashing crypto prices. The premiere blockchain analysis firm disclosed that BTC transactions tanked by 80% to $96M USD in September 2018.
In fact, that was even before a major collapse happened. The report noted that the figure became the outcome of Bitcoin because it has no real world asset-backing. In truth, the value of BTC depends on market perception of the cryptocurrency.
Understanding a speculative market
A speculative market is always unpredictable. Looking at how bad it is, mere bad press can sway public perception on cryptocurrency. Consequently, there will be massive dumps. To make matters worse, crypto dramas are playing out coupled with the SEC gunning for the market players. Indeed, this has increased investors’ fears about the market.
However, there is a lesson for all the investors to learn from the crashing tendencies of the cryptocurrencies. Essentially, they have to move their focus from the cryptocurrency price to the market as it merely reflects the perception and speculation. That is, they should pay more attention to technology longevity and market value.
Making informed investment decisions
It is worthy to note that an investment in a cryptocurrency that is profitable is way better than any investment based on speculation. For instance, the team behind Bitcoin Lightning technology has made some advances to date. In contrast, a trader makes short-term gains when he buys and sells frequently in a bid to outsmart the volatile market.
Well, the Bitcoin Lightning team will eventually make more impact on the market than the traders trying to outsmart it. For those who may not know, Bitcoin Lightning technology seeks to end the coin’s slow transaction pace. In conclusion, until cryptocurrency can build an extensive user base and deliver value, the market will remain highly volatile as evidenced by the recent crashing prices.
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