Why is Bitcoin Crashing?

In the beginning of February, the values of cryptocurrencies plunged, following a trend that began at the end of 2017.

Bitcoin, as well as other cryptocurrencies such as Ethereum, have lost more than half their value in the past month. Bitcoin fell from $18,000 to around $6,000. The fall seems to have halted now and prices are on their way to recovery.

The volatility, unpredictability and unregulated nature of cryptocurrencies cause investors to worry about the future of cryptocurrencies. This affects mostly new investors because, even though the prices are falling, they are still higher than they were several months ago.

Everybody that is interested in investing and earning money from cryptocurrencies, including Bitcoin, speculate the different reasons for the price drops. There are several events which are being associated with the price fall.

First, governments around the world are imposing different kinds of regulations regarding cryptocurrency transactions. Some regulations are harsher than others. China is banning the trading of any cryptocurrency and participation in coin offerings. The Indian Finance Minister announced plans to ban the use of cryptocurrencies for payments. South Korea didn’t ban cryptocurrencies but emphasized the need to regulate them more heavily.

Institutions, such as banks, started to plan for some regulations on cryptocurrencies also. Lloyd’s Bank (UK) and Virgin Money (US) and other US banks banned credit card transactions involving Bitcoin. Banks are afraid of having to pay a bunch of unpaid debt of their clients if Bitcoin prices continue to drop.

Many other concerns are following this global panic, like Facebook banning crypto ads and some crypto exchanges shutting down.

Even though the Blockchain technology upon which Bitcoin is based is considered secure, it is not 100% resistant to hacks and misuse. A blockchain startup suffered a cyber attack and in a later instance, about £380 million of NEM cryptocurrency was stolen in a hacking of a Coincheck exchange.

All of these factors and several others contribute to the price plunge. For now, there is no reason to believe that the cryptocurrencies won’t recover soon, in some measure at least.



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