Bitcoin has dropped significantly from its $20,000 highs and may be finding difficulty finding solid support.
After breaking through the $20,000 mark on Dec. 17, Bitcoin suffered a rather large correction to $12,000 before rebounding and settling between $13,000 and $15,000. However, the digital currency has suffered a few setbacks since that monster rally, leaving some to wonder if the bull run might be over.
The 2013 bull run was ended by the dramatic collapse of Mt. Gox, and so far, nothing that big has happened to Bitcoin. Nonetheless, it’s always possible that the end of 2017’s extraordinary run could die by a thousand cuts.
Last year, China first banned ICOs and then closed cryptocurrency exchanges in the country. Now the government is taking aim at mining. China has long been the epicentre for Bitcoin mining, in large part due to the country’s inexpensive electricity prices. Now the Chinese government is considering restricting Bitcoin miners’ access to inexpensive sources of power, which would significantly change the economics of Bitcoin mining.
There has also been a change in the dominance factor of Bitcoin as many looked to diversify their digital currency portfolios to better performing altcoins. Coins like Ripple, Ethereum and Tron have surged in value, essentially stealing market share from Bitcoin. As recently as March 2017, Bitcoin made up 85% of the total market capitalization of the entire market. Today, Bitcoin’s so-called dominance, or market share, has dropped to an all-time low of 33.6%.
The second largest country in the world, India, is starting to look hostile as its government seeks to tighten regulation on digital currencies. Recently, an advocate for Public Interest Litigation filed to immediately regulate the flow of Bitcoin in and out the country.
In Venezuela, a place where Bitcoin has flourished due to the unrest and economic breakdown, President Maduro has ordered the issue of the country’s own digital currency, the Petro, which Venezuelans might see as Bitcoin’s competition. However, it should be noted that a country officially issuing its own digital currency certainly adds legitimacy to the concept of cryptocurrency as a whole. Further, since Maduro can’t restrain himself from printing a nearly unlimited supply of Bolivars, it’s likely the Petro will eventually suffer the same hyperinflation.
The charts are indecisive, with Bitcoin’s price currently in a consolidation pattern. Expect this sideways “triangle” to break either up or down later this month. Volume is also down, below its 30 day moving average, but this is common in a consolidation phase.
It should be remembered that the rise from $9,000 to $20,000 occurred in just three weeks, so the market likely needs some time to get its legs back under it.
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Author: Darryn Pollock