Bitcoin continues to experience a bearish price trend, at one point falling below $5,800 over the weekend, which is a new low for the year. Although there is no single reason for the price correction, a number of significant factors are no-doubt playing a role. These include regulatory and hostile actions by governments as well as internal challenges with the platform. Although all of these issues can be resolved, there should be no doubt that changes are needed for Bitcoin to reach a level of sustained value.
By any measure, the news over the last few weeks has not been good for the flagship cryptocurrency. A number of negative reports have created concern for investors. These reports include two South Korean exchanges being hacked, and a decree by the Reserve Bank of India prohibiting Indian banks from having any involvement with cryptocurrency or crypto businesses. There has also been a greater push for regulation in many countries, as well as the recent report from the Switzerland-based Bank for International Settlements claiming that mainstream adoption of Bitcoin could “bring the Internet to a halt.”
These factors alone would not be enough to cause such a significant drop in value, but Bitcoin also needs to overcome its technical limitations and become a platform that can actually deliver on its promises as a decentralized currency. Despite the release of the Lightning Network, transaction times still average well over ten minutes. Also, the public has yet to embrace the notion of Bitcoin as a superior alternative to fiat. Wallets and exchanges may be easy to use for the technically savvy, but much of the general public finds them confusing when compared to a bank account and a debit card.
Thus, given the current issues, Bitcoin’s decline since January is understandable. There are, of course, many reasons to presume that the price will recover, and it could move far above its all time high of $20,000. In one way or another transaction times will be reduced, and no doubt other issues will be addressed. But the value of Bitcoin, as with other cryptocurrencies, will ultimately be determined by its use. All prices in the crypto space are presently speculative, as blockchain has yet to become a mainstream technology. There is little doubt that it will, and it is at that time that the true value of Bitcoin and other platforms can be determined.
Perhaps one of the key indicators that Bitcoin will recover is the fact that the entire crypto space has declined along with it. In fact, a number of major alt coins have seen far greater drops in value. This fact is clear evidence that Bitcoin’s decline is likely more an indicator of investor skepticism of the entire crypto sector, rather than with Bitcoin specifically. Given that many platforms are moving ahead very quickly with adoption and development, interest in investment is sure to follow. However, to succeed long-term Bitcoin must demonstrate the ability to keep up with its competitors on its technical merits. In fact, competing platforms present a far greater threat to Bitcoins long-term viability than hostile governments or a skeptical public.
The continued price drop is more proof that volatility remains the norm for cryptocurrency values. Bitcoin will likely recover, but for it to become the permanent standard bearer for cryptocurrency the systemic issues will need to be fixed. Specifically, ordinary people will need a reason to use it, and it must be securely embraced by governments across the globe. Given the revolutionary potential of blockchain technology, these steps are all but certain to happen.
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