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Of Jasmin Boyce
Bitcoin dropped below $ 5,000 on Monday, adding to what became a 2018 nightmare for investors who have promoted cryptocurrency.
The continuous drops come after the bitcoin value rose to December 2017, touching nearly $ 20,000. As of Tuesday, a single Bitcoin was trading around $ 4,400 – the lowest level of the year.
Bitcoin is not alone. Other famous cryptocurrencies have also collapsed for the whole year, touching new lows this week. A cryptocurrency is a form of digital currency that is based on technology known as blockchain, in which computers compete against each other to solve complex math problems. That computing power creates a distributed, secure and transparent network register, commonly known as blockchain, on which applications such as bitcoins can be built.
The increase in enthusiasm for bitcoins has led to an influx of investments and speculation on cryptocurrencies and startups linked to the blockchain. The growing hopes that price increases attract institutions such as banks and governments have also helped to further strengthen the legitimacy of bitcoin. Some analysts once predicted that the value of Bitcoin could have reached $ 100,000.
But falling prices have been met by growing skepticism and exacerbated by the claims that previous bitcoin price increases have been artificially inflated. The US Department of Justice is currently examining whether the high market value of bitcoin last year was a result of market manipulators. Investigators have speculated that some cryptocurrency traders used Tether, a cryptocurrency used to predict the prices of other cryptocurrencies, to encourage bitcoin increases.
Patrick Paul Palacios, president and CEO of LoyalCoin, a company that offers blockchain-based business rewards programs, said the survey was one of the many reasons for the decline in bitcoin.
"It's a combination of all these factors, which obviously includes the fact that everyone is panicking." Palacios said.
Palacios added that people who had invested in bitcoins when the price was rising rapidly were probably unprepared for a decline, leading to greater volatility while people sold their investments.
"They do not understand how cryptography works," Palacios said. "There's really a lot of volatility here for newbies."
Shone Anstey, executive president and co-founder of Blockchain Intelligence Group, explained how inexperienced investors quickly invested bitcoins in the past year, while investors are "trying to stop gains before they fade."
"Speed of money," said Anstey. "Quick money is taken away."
Although the value of bitcoin is in a downward trend, Anstey has warned against counting the cryptocurrency or the underlying blockchain technology.
"We overstate technologies in the short term, but we underestimate them enormously in the long term," said Anstey.
While some analysts are predicting a long-term recovery, others suggest that a breakthrough could occur by the end of 2018.
Tom Lee, a Wall Street strategist, kept his $ 15,000 year-end forecast for bitcoins during an interview with CNBC Tuesday.
Lee predicted that incoming waves of "institutional" adoption and "regulatory clarity" were factors that would ultimately push the bitcoin market price back up.