Bitcoin Price Drop: Brief Analysis

Bitcoin Price Drop: Brief Analysis

BTC in 2019

After reaching incredible highs in 2017, Bitcoin price has declined quite a bit. This year markets expected a comeback. Indeed, for the most part of 2019 BTC fluctuations have only been following an upward trend, from floating around $3,800 in January 2019 to getting close to $12,000 by the middle of July. Then came September.

September Price Decline

Bitcoin pricing has been on the downward slope in the second half of September. Then on September 24, in just a matter of hours, its price dropped from $9,353 to $7,800 on the cryptocurrency exchange Binance. Since then, BTC has stabilized, and was trading around $8,188 when this article was published. Data shows that Bitcoin has plummeted more than a whopping 15% this month, which is a huge drop considering such a short period of time.

It is interesting that the BTC downward trend seems to be directly correlated with other cryptocurrencies, as they always seem to mimic their oldest peer. Another top dog of the crypto market, Ethereum, suffered a significant decline as well, going from its price tag of $210 on September 23 to $166 in just over a day. 

What is Behind BTC Fall?

Coincidentally, a couple of events occurred simultaneously in September 2019.

After ensuring full compliance with the United States authorities, Bakkt, the first federally regulated platform for Bitcoin futures trading launched on September 23. Conceived by the Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE), Bakkt boasts such backers as Microsoft’s venture fund M12 and Starbucks. The platform offers institutional traders something new: physically-settled BTC futures contracts, combined with a sound custodial service approved by the Commodity Futures Trading Commission. Analysts were looking forward to the new platform inspiring investor confidence and legitimizing cryptocurrencies in the eyes of the general population. And yet, despite the hype, Bakkt did not do as well as expected on the first day of trading.

Because the slow start of Bakkt coincided with is the sudden drop in Bitcoin and other CC prices, analysts see it as a potential cause.

Among other reasons behind the BTC price slump could be low trading volume and the associated technical changes, as well as Bitcoin hash rate drop (which has reversed since).

What Does This Mean?

As Bitcoin remains the main asset of the blockchain world, its price instability could impact the whole industry. However, if the price decline was caused by the response to the slow adoption of the promising new products offered by Bakkt, it is unlikely to have a long-term effect. While the blockchain community is trying to figure out the true reasons behind dramatic swings in BTC, the best course of action is to wait and see what happens next. 

George Khmelevski

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