Bitcoin: Going Higher? Five Factors to Drag Down Prices
What goes up must come down, and Bitcoin is no exception. The question is how much of a correction would the coin take, and what would cause it. Here are five factors that threaten the current high Bitcoin price. At $7,000 and above, the current rates of Bitcoin dwarf the earnings of the early Bitcoin millionaires who cashed out at $2,000.
- Blockchain takeover: According to Vinny Lingham, blockchain entrepreneur and reality TV star, it is impossible for a weak and slow blockchain to have the higher market price. The coming hard fork around November 16 will create two blockchains- and see them compete immediately for hashing power. Imagine a digital asset called "Bitcoin" with a market price above $7,000 and just enough miners to slow transactions to hours, or even days. Such an asset would not be usable and quickly lose its price. And the coin of the SegWit2X network will have to find a mechanism to inherit the current market valuations.
- Whales: Currently, around 600,000 BTC coins change hands in a day. But that is when volumes are near record. On a slower day, a whale could choose to affect the price, in a completely unpredictable move. Of course, given enough buyers, a whale could be "eaten" alive and the orders taken, but it is still possible to manipulate the market, given that around 1,000 wallets hold up to 50% of all existing Bitcoin.
- Money sucked out of the economy: In the past few years, the economies of developed countries have been flush with liquidity, courtesy of central banks lowering interest rates to a minimum. This was a response to the 2008 financial crisis and was a measure that led to a continued boom which spilled over to all sectors of the economy. In short, the world has been rich in the past years, and Bitcoin appeared just as investors had a lot of money burning in their pockets. But now, the British Central Bank plans a rate hike, a new Fed chairman is elected and the era of rock-bottom interest rates may be coming to a close. On top of all, the stock markets are at a peak- and if the mainstream investment world starts to cool off, cryptocurrencies may see less investment.
- Strict regulation: The case of China has proven that one bout of regulatory pressure cannot stop the rise in Bitcoin prices. But there are ways to make Bitcoin die a death by a thousand cuts. Even the current demands for personal verification when buying larger amounts of Bitcoin are a hassle. Now imagine more restrictive laws that criminalize the usage of Bitcoin. So far, very few countries have such restrictions, but with the visibility of Bitcoin and its value rising even more, we may see more cases of similar regulation. Or if not an outright ban, then how about expensive licensing? Bitlicense in the state of New York has made trading harder as it put off some exchanges. And while Bitcoin is decentralized, connections to a node can be traced- and cut off, thus making you unable to verify your transactions.
- Just plain sobering up: Currently, Bitcoin has a certain aura, and a lot of newcomers know little of cryptocurrencies beyond that name. But as they quickly learn the ins and outs of cryptocurrencies and some of the weaknesses, some may start to doubt the potential of Bitcoin, beyond the current rise in prices. And other investors may look around and see that altcoins also hold much promise, but also better technologies. So while now all eyes are on Bitcoin and much less attention is given to newer projects, in the future, altcoins may be back in the game- given that ICOs are still attracting investments.
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