KitGuru KitGuru.net – Tech News | Hardware News | Hardware Reviews | IOS | Mobile | Gaming | Graphics Cards
We've talked about it for a few weeks now, the stupendous rise of Bitcoin's value as Chinese investors jumped on board the gravy train and started buying up the digital currency in huge quantities and they're still doing it, but that doesn't mean the price is going to continue to rise. In-fact, late last night the value of individual coins began to fall and it looks like it's going to continue to do so if the latest trades are anything to go by.
In the last 12 hours, the average value of each Bitcoin has fallen almost $100, from a high over over $700 to a current average of around $625 (Blockchain) or $600 (MtGox) depending on which exchange you turn to. However looking closer at the latter of those two, you also get information on some of the other sales going on, like the last sale price for example. While the average might be hovering around the 600 mark, the last trade at the time of writing went for $507 (Update: make that $500) with the lowest in the past few hours going for just $475.
Hold on to your hats people. Here we go.
A month ago, that lowest price would still have been a great sale, but today that represents a 20 per cent drop in Bitcoin value in less than a day. It's too early to say if this crash will be as catastophic (per centage wise) as the original Bitcoin bubble burst, but it's already fallen as much in value as the coins did back in April this year.
KitGuru Says: While I'd never go so far as to offer financial advice, if you're sitting on a stockpile waiting for it to peak, you should keep a close eye on these numbers as they don't look favourable.
Someone has not been around Bitcoin very long. If it’s a crash, it’s at least 3.0, not 2.0. It’s as if we called the next world war, World War 2, because the war in the 1910’s is too long ago for us to remember.
My advice for anyone panicking in this sell-off: don’t sweat it. This happens regularly, as a natural part of the hype cycle.
As Bitcoin matures, the volatility becomes less. The first crash (that I am aware of) was in 2011, where it crashed from $30 to about $2. That is about a 15x ratio from peak to trough. The second crash in April 2013 went from $250 to about $50, or a 5x ratio from peak to trough. This time, the so-called “crash” has gone from a peak of about $900 to $500 so far. It could easily drop farther, but I don’t see it dropping below $300, personally, a 3x ratio. Furthermore, it was only about 5 days ago that it broke through current levels around $500 on its way up. So far, you’re only burned if you bought in the last 3-4 days.
The other thing to note besides the relatively smaller size of the “crash” after each excessive hype-driven run-up, is that the overall trajectory of Bitcoin’s value continues up. The peaks have gone from $30 to $250 to $900. The troughs have gone from $2 to $50 to my estimate of $300+ (not known so far of course).
In other words, the picture is bullish in the long run, so if you want to invest, do so for the long run.
Nothing fundamental about Bitcoin’s nature changed between 2 days ago and today. The only thing that changed is that some people started feeling it was going too high, too fast, and decided to “cash” out (ironic, as Bitcoin is the purest form of cash so far…).