The price of Bitcoin
Ever since I started writing articles about Bitcoin for CityAM, the price of Bitcoin has gone up over 100% exactly as expected. However, over the past 72 hours, the price of Bitcoin has retraced 23%. There are a few reasons for this and I will detail them in this article. I will also detail what I expect is the net result of all of this recent news and let you know what I think is coming next for bitcoin and cryptocurrencies.
So kicking things off we have a 23% drop in 72 hours. On the surface, not a good thing at all! In normal markets you would put this down to a sudden loss of confidence, but in crypto things are a little different. There are people that bought bitcoin for $3 and they are still holding; there are people that have huge mining farms that have to sell large quantities to fund operations. A combination of these 2 things is what makes bitcoin insanely volatile.
As the world slowly adopts bitcoin, the amount of individuals holding large amounts of Bitcoin reduces as they sell to take perceived profit into FIAT currency or perhaps they realise their profit in a different cryptocurrency. When these large holding individuals sell Bitcoin it can trigger a loss of confidence among the community so you end up with a cascading sell-off. However that is not what happened here.
F2 Pool sells out
In the case of why Bitcoin fell 23%, this can be put down to two primary reasons. F2Pool Bitcoin mining pool sent 3633 Bitcoin in a single transaction out of their bitcoin mining wallet and right onto the exchanges. They then proceeded to dump all of this bitcoin in a very short period of time. It is unknown if F2pool were also shorting Bitcoin to capitalise on the price falling. As the price of Bitcoin fell, there are so many new people in the market and new money is easily panicked so they then start selling for a loss and so you end up with huge amounts of Bitcoin flooding towards exchanges. This...