The Reason for Bitcoin’s Drop Has Nothing to Do with Bitcoin
The world of cryptocurrencies is nothing if not dramatic.
In a ridiculous twist of fate, Bitcoin, the king of crypto, has been crushed beneath a month’s-long support line by its evil twin, Bitcoin Cash.
To give you a (very brief) summary: Bitcoin Cash (BCH) split off from Bitcoin (BTC) in the middle of 2017, in what is known in the crypto space as a hard fork, which is essentially a software upgrade (that can spawn a new cryptocurrency). Now, Bitcoin Cash is undergoing its own hard fork, which has left the entire crypto space confused and in total disarray.
Fears of a “Bitcoin civil war” between Bitcoin Cash and the newly created coin are what traders are pointing to as the cause of Bitcoin’s drop. But it isn’t as simple as that. Bitcoin Cash is a fraction of the combined cryptocurrency market cap, making up less than 4% of its total. It’s the 4th largest coin by market cap, but not nearly as substantial as Bitcoin (53%) and Ethereum (9%)
In other words, something else is going on here. And if it isn’t a news headline, we need to look at what the technical indicators are telling us.
Bitcoin Bulls and Bears Have Been Fighting Over Trend Lines for Months
Earlier this year, the price of Bitcoin fell a staggering 70%, from it’s high around $20,000 to a low of $6,000. Since then, Bitcoin has managed to hold that $6k support. But a bearish trendline, which formed from subsequent rises and drops, has plagued the market ever since.
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After slowly descending week-after-week, Bitcoin now sits well below the $6k support line. A major show of support from the bulls could bring it back into its triangle pattern, but if we get a weekly close under this triangle, a further tumble could be in store for BTC.
Bitcoin May Be Falling, But It’s Still Bursting With Potential
Here’s some food for thought: 18 months ago, Bitcoin was trading at $800. Eight months later, it was at $20,000. Now it’s sitting close to $6,000. That’s one heck of a ride.
Despite the huge price movements, Bitcoin has shown incredible stability and resilience since its creation in 2010. It’s potential for a storage of value is very real, and it’s for this reason alone that many investors still hold large amounts in their portfolios.
Bitcoin, plain and simple, is digital gold. Like gold, it has limited supply. Like gold, it requires “work” (computing power, which requires lots of electricity) to “mine” coins out of the blockchain.
But Bitcoin has one very special aspect that regular gold does not: it can move around the world in less than a second. It requires zero effort to transport. In fact, if you memorized your encryption code, you can travel anywhere with hundreds of millions of dollars stored in your head. That’s crazy!
Right now, it doesn’t seem like Bitcoin is a good transaction currency. Would you pay your cashier at the grocery store in gold coins? Of course you wouldn’t, it’s too precious. Nobody buys a cup of Starbucks coffee with gold bullion. People would look at you funny.
But as a store of wealth? Bitcoin could change the world, and in many ways it already has.