Here are the main reasons why bitcoin prices are plummeting and the bullish factors that could support them

a hand holding a coin

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A new record for bitcoin will have to wait, if it ever comes.

Bitcoin prices were pummeled on Friday, pushing the cryptocurrency into correction territory, commonly referred to as an asset’s drop from a recent high of at least 10%.

On the last check, Bitcoin changed hands on CoinDesk, down 2.4%, to $ 16,714, representing a drop of more than 14% from its 52-week peak at $ 19,495, set in less than 24 hours earlier. of the Thanksgiving crash.

Bitcoin has been a traditionally volatile asset since its inception, but if those who watch the closely followed cryptocurrency are looking for the reasons for its recent decline, market participants have pointed to at least three key factors:

Part of the decline of bitcoin and the larger cryptocurrency complex is attributed to a series of messages from Coinbase CEO Armstrong via Twitter. On Wednesday, Armstrong hinted to the US Treasury Department of my attempt to push through stricter regulation before the Trump administration leaves office.

The threat of tougher regulation has always loomed over the nascent digital currency industry, but the comments may have been enough to initiate a bearish bias on bitcoins which have enjoyed a gain of more than 130% year to date, experts said.

Charles Hayter, founder of CryptoCompare, told MarketWatch that the bitcoin withdrawal as “one of the fastest moves” he has seen, adding that it was not unexpected after the cryptocurrency had such a brisk run near its all-time high in December. 2017.

“This was one of the fastest moves Bitcoin has made. Of course, there is a pullback to these points as the off exchange to on exchange shifts occur, ”Hayter said in comments emailed to MarketWatch on Friday.

Gallery: 9 investment bubbles that will make you rethink Bitcoin (GOBankingRates)

What do urban property prices in Japan, dot-com stocks and Dutch tulips have in common?  They were all subject to massive financial bubbles that sent prices soar, only to burst and drive impatient investors from huge fortunes to bankruptcy.  Although the initial frenzy around bitcoin has somewhat dissipated, many are still considering whether to bet everything on cryptocurrency.  It may be tempting, but there are many cases from years past that can serve as a sobering reminder that when something sounds too good to be true, it usually is.  No matter how many times rampant speculation has exploded in people's faces, there always seems to be a new generation of fortune seekers ready to dive into the next frenzy.  The mirage of easy money, the fear of getting lost and the theory of the greatest fool, which dictates that no purchase is truly stupid as long as a

Bitcoin’s rise into the stratosphere comes as the Dow Jones Industrial Average

has risen 5% so far this year, the S&P 500 index has gained over 12% over the same period and the Nasdaq Composite Index has grown 35% since the beginning of the year to date. Meanwhile, gold is up 19% this year and is planning a reversal of much of its rally with the emergence of viable COVID-19 vaccines.

“Some of the 10k buyers will collect their winnings and some who have been hiding at these levels since 2018 will be happy to exit the trade,” he speculated.

A chart released Friday by Bespoke Investment Group highlights a key fact that new bitcoins need to get used to: its traditional volatility.

Bespoke wrote that Thursday’s drops in magnitude aren’t particularly out of the ordinary over bitcoin’s history, noting that since 2017 bitcoin has seen 24 more heartbreaking one-day drops than Thanksgiving (see attached chart):

While the bears may use this current withdrawal as a warning as to why bitcoin is a problematic asset, many continue to hold the asset in hopes of a more bullish horizon for cryptocurrencies.

Facebook’s digital currency network, Libra, could be launched as early as January, according to reports. If so, it would represent a major achievement for the story as a whole, even if critics claim that the Libra coin does not truly represent the traditional cryptocurrency market.

That said, it could be a flagship of digital asset advocates at a time when virtual currencies are attracting greater mainstream appeal.

Last month, PayPal Holdings said it will allow customers to purchase cryptocurrency through their accounts and use the cryptocurrency for merchant payments, which also lent some legitimacy to the nascent asset.

Major investors, including hedge fund luminary Paul Tudor Jones, have become proponents of the asset, describing its recent rally in a CNBC interview as its “first inning.”

Such apparent approvals highlight growing attention from institutional investors towards bitcoin as a legitimate alternative to fiat currency or other assets used to hedge their exposure to conventional investment instruments.

To be sure, bitcoin and its counterparts, critics warn, could still drop to zero and herein lies the intrigue and potential danger of digital currencies.

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