Bitcoin peaked above $ 19,000 in December 2017. It is now trading at around $ 4,600.
So it seems safe to say that the bitcoin bubble has exploded. Should investors start dipping their feet back into bitcoin and other crypto related assets?
Maybe. Some bitcoin bulls have welcomed recent volatility. This might scare some momentum investors who are rushing in, which means that bargain seekers can get bitcoin at a more attractive price.
"Smart investors understand that digital currencies are the future of money and, as such, they will capitalize lower prices to build portfolios and sustain their position," said Nigel Green, CEO of deVere Group, a financial institution. advisory company.
"Traditional financialists see cryptocurrency the traditional shop way used to view online retailers," Green said. "Cynical crypto uses the current wave of volatility to drop digital currencies. Is it Bitcoin, or one of the current generation coins, or not, cryptocurrency is here to stay."
The SEC strictly supervises suspicious ICO
There are also more technical reasons, italics why bitcoin falls.
Last year, bitcoin has gone through a separation process known as a fork. The first fork produces bitcoin cash – and bitcoin cash has now split into two other forks. For average investors, this basically means more volatility.
But there are still some potential problems for bitcoin and other crypto legions out there, such as ethereum, litecoin, ripples and stars. Their prices have all fallen lately too.
Part of the problem is the bubble mentality. Short-term investors all try to get rich with this cryptocurrency and offer initial coins or ICO. They are securities that are supported by crypto assets.
But they are very risky. And the Securities and Exchange Commission began to take action against the ICO that did not pass the regulations.
"The SEC reminded the crypto world that it has a final decision on anything that smells like security," said Naeem Aslam, head of market analyst at Think Markets UK. "The fear is that the SEC may not stop here and may take similar actions against some companies that adopt the same path.
He argued that many companies would not be able to raise more capital and would not be able to survive.
"The bear market today will change from bad to worse very quickly both for crypto funds and ICO projects. The pain ahead is something many of these entrepreneurs and fund managers have never had to deal with," Pompliano wrote.
But he saw a light at the end of the tunnel. Pompliano was convinced that a reshuffle was now needed. This will get rid of the market from a weak hand and leave only true crypto believers – as opposed to traders – to be left to live a prosperous life of continuous growth in the crypto world.
"Things will get much worse before they get better. That's okay. Remember, the bear market gets rid of tourists so true entrepreneurs can focus on building sustainable values," Pompliano wrote.