Bitcoin is one of the most fascinating and unique cryptocurrencies out there. The underlying technology, known as the blockchain, is what makes Bitcoin special. Even more so is the fact that it’s decentralized and not controlled by anyone’s party like other currencies are. Recently the price of bitcoin has been decreasing quite a bit, but that doesn’t mean it’s the end.
Factors that could have caused the drop
- Global inflation
The year 2017 was the first time in a while that global inflation went down. This is one of the reasons why central banks decreased their interest rates over the past year. The Federal Reserve, for instance, decreased its rate by a quarter-point last December. However, this could be an indirect factor that caused the price to go down.
- Global politics
The recent increase in terror attacks around the world also had an impact on the price of bitcoin. Some have even predicted that this could lead to a worldwide recession. Bitcoin futures trading has also been affected by the ongoing supremacy war between Russia and Ukraine also puts international investors on edge.
- Emergence of new cryptocurrencies
In recent months, a lot of new cryptocurrencies have emerged. However, only a few of them are successful and their worth isn’t that high. And while it’s true that they could be seen as competition to bitcoin, that isn’t the case as they are all essentially Bitcoin 2.0 with different implementations and ideas.
- A lack of regulation
The lack of regulation has also played a role in the price dropping significantly. Tons of new investors have started investing in bitcoin over the past few years, but they don’t know how to use it correctly. This has led to a situation where bitcoin has been rather volatile. A lot of new investors also overuse it and that has caused a lot of issues recently.
- Concerns regarding the miners
One other thing that people have been worried about is that miners are going out of business due to the price drop. If that happens, it could have a massive impact on the remaining miners. They would probably have to start charging a fee to continue mining, which would turn bitcoin into a Ponzi scheme.
- Increases in transaction fees
In addition to the miners staying in business, higher transaction fees could also put them out of business. The fact that transactions are now running slower and more expensive isn’t great news for most investors.
- Lower liquidity
There is simply not enough liquidity in bitcoin these days, which is worrisome for all the investors. Due to this, not a lot of companies are going to accept bitcoin as a form of payment. Some are even questioning whether or not it’s still a viable payment method.
- Stock in the market
Over the past few years, a lot of new players entered the bitcoin market. A lot of them have been very good at short-term trading, but they’ve been failing to produce a long-term asset. Throughout 2021, more and more companies have announced that they won’t accept bitcoin as payment anymore. That is because their stocks are too low in value.
The future of Bitcoin is still up in the air and no one knows what the future has in store. One thing is for certain though and that thing is that Bitcoin will eventually recover. The only question left to ask is when will it happen exactly? Most people believe that it’s wrong to say that bitcoin has failed, but some issues need to be addressed as soon as possible.
