Is Bitcoin a Bubble? That is the question that all cryptocurrency community buzzes about. Will Bitcoin bubble burst? If yes, then when? We answer these and other questions in our educational piece about 3 Ways of How Bitcoin Can Crash.
29 November, AtoZForex – Bitcoin price has just surpassed a historic level – the leading digital currency from the list of the top cryptocurrencies in 2017 has broken through the $10,000 level and nearing the $11,000.
Is Bitcoin a Bubble?
However, the great success comes with a note of fear in this case. As Bitcoin continues to hit fresher highs month by month, many investors are trying to find the explanation for the Bitcoin craze. As one of the suggested options states, Bitcoin can be a bubble. However, can it, really?
This nobody knows for sure. Yet, despite the great uncertainty in regards to this topic, there are some more or less concrete scenarios that illustrate the possibility of Bitcoin bubble burst. Here, we discuss 3 ways of Bitcoin era ending and try to find the answer for “Is Bitcoin a Bubble?”.
#1 Is Bitfinex the next Mt. Gox?
You might have heard about Mt. Gox story, once the world’s leading Bitcoin exchange. The exchange was established in 2010, while in June 2011, there was a security breach on the official website of the exchange, which has caused a drastic drop in Bitcoin’s price.
Then, Mt. Gox suspended withdrawals in US dollars on June 20, 2013. After a series of disruptions and other issues over stolen Bitcoins within Mt. Gox, the exchange has filed for bankruptcy in 2014. In the end, the CEO of Mt. Gox was arrested in Japan and the exchange’s place now is taken over by Bitfinex.
In fact, Bitfinex has been hacked earlier last year, with the overall loss in funds accounted for around $72 million. Many investors fear that Bitfinex can face the same fate as Mt. Gox did. While this scenario has the least chances to take place, it is very crucial still to watch Bitfinex.
#2 Regulatory clampdown
Another version of how Bitcoin could end is the possible regulatory crackdown on the crypto market. Since we have seen a lot of global regulators considering ICOs and cryptocurrency regulations, market insiders believe that this might appear as the cause of Bitcoin era end. As we all know, Bitcoin is not tied to any governmental body, and neither is it regulated.
However, as Bitcoin mania is taking over the world, more and more cryptocurrency related scams appear across the globe. In addition, some criminals use Bitcoin for their illegal activities, since Bitcoin is untraceable. That what has got all financial supervisors all over the world on their toes.
One of the major recent crackdowns on the cryptomarket was carried out by Chinese authorities. There, officials decided to put a ban on ICOs, which also in certain degree has prompted major Chinese Bitcoin exchanges to shut their doors.
Other nations that consider regulating crypto market include the Philippines, Anguilla, Singapore, and Israel. Meanwhile, there was a myriad of regulatory warning in regards to the ICOs, with the latest ones coming from Germany, ESMA (key European regulator), New Zealand and the US.
Indeed, the nature of cryptocurrencies is quite risky and volatile, but so is the nature of any investment. The only thing that differs is the degree of volatility. In case regulators decide to impose any kind of regulations on the cryptomarket, this might appear as the obstacle for the development of some coins, including Bitcoin.
Consequently, the money inflow into the ICO market might dry up, slowly and steadily leading to the significant market decline.
#3 Removal of gateways between cryptocurrencies and fiat currencies
The last and the most probable cause of the possible crash in Bitcoin is the removal of gateways between cryptocurrencies and fiat currencies. Above I have mentioned the shut down of BTC China, while some online sources speculate that all Bitcoin exchanges in China might shut down.
What is the connection, you will ask?
If we look at the historic Bitcoin price, we can notice that the major declines in the price of Bitcoin occurred at the time when the news about Chinese exchanges has emerged. This is an example of how removing gateways to cryptocurrencies from fiat currencies can be one of the major risks for the market.
While Chinese crackdown on exchanges might not kill the market immediately, it definitely can be the beginning of the Bitcoin end. Yet, the majority of market insiders see very less chance for the officials removing the gateways to cryptocurrencies from fiat.
Think we missed something? Is Bitcoin a Bubble in your opinion? Let us know in the comments section below.