The price of Bitcoin lost another 10% on Tuesday, extending a decline that brought virtual currency down 33% in the last month and 46% in the last year.
The boom and bust cycles are par for the bitcoin course. So far this year, there have only been three days when the S & P 500 stock index fell more than 3 percent, with the worst decline of 4 percent in February, says Duke's finance professor University, Campbell R. Harvey. "On the contrary, there are seven days in which the bitcoin has dropped by more than 10 percent with the worst of 16 percent, even in February.Only for the prospect, 16 percent is equivalent to a dip in the Dow of 4,000 points, which would require some attention. "
"When you have something with a history of extreme volatility, that's what you should expect," says Harvey.
Just like the stock market, bitcoin has a rising trend, at least on a fairly long timeline. In November 2013, the bitcoin rose from just over $ 200 to over $ 1,200, and then dropped to less than $ 600 the following month. Bitcoin remains well below its over $ 19,000 last December; but it recovers even more than double what it did at the beginning of the last boom in May 2017, just 18 months ago. And those who bought when the currency was traded at $ 200 or less obviously will still be quite happy.
But that will be of little comfort for those who bought bitcoin when he was riding high. And there's certainly no reason for bitcoin investors to be worried this time.
The current slowdown could concern fractures in the bitcoin community. Last year, a group of bitcoin developers created an alternative version of bitcoin, known as "hard fork", called Bitcoin Cash, to solve technical problems in the original bitcoin. Bitcoin Cash failed to move the original, but earned a number of loyal followers. But last week, Bitcoin Cash saw its own hard fork. This schism does not directly influence the original bitcoin, but further fragmentation of the community could scare investors.
In the long run, perhaps a more troubling development is a survey by the US Department of Justice reported by Bloomberg Tuesday on whether the historic highs of last year were the result of market manipulation. The investigation follows the publication of an article by Griffith University professor John Griffin and his doctoral student Amin Shams suggesting that another cryptocurrency called a tether has been used to stabilize and manipulate the price of bitcoins. # 39; last year.
There may be ways to make bitcoin less volatile. Harvey, the professor of the Duke, attributes volatility to the difficulty of evaluating bitcoins. You can evaluate a company's shares based on its performance or a fiat currency based on a country's economy and tax policies. But Bitcoin lacks these types of fundamentals.
Harvey says that the bitcoin would be easier to assess if it had more regulatory recognition, if it was more widely used as a payment method, and if its transaction times, which can vary as much as its price, were more consistent. But there are a couple of chicken and egg problems there. One reason that bitcoin is not widely used as currency is because of its volatility. This leaves the future of bitcoin uncertain as ever.