Two Simple Things Could Cause Massive Bitcoin Crash
The year 2017 saw an unprecedented rise in the value of Bitcoin, with the once disregarded cryptocurrency gaining much wider public interest.
With its value soaring above $13,000, many Bitcoin investors are feeling positive. Some are even predicting it will continue to rise to $40,000 by the end of 2018, bolstered by escalating demand.
However not all forecasts are as optimistic, with some experts warning there is the potential for an enormous crash.
Economics expert Panos Mourdoukoutas has predicted how two events in particular could dramatically deplete the value of Bitcoin, dragging it back down to $1000.
According to Wonderful Engineering, Mourdoukoutas said:
There are a couple of things that could kill the hype for the digital currency and help push demand in the opposite direction.
One of them is a Lehman or Enron-style fraud event, not necessarily in the Bitcoin market, but in some other cryptocurrency market, which brings to mind the wild west mentality of mid 19th-century capitalism.
According to Mourdoukoutas, a massive cryptocurrency fraud event could quash Bitcoin demand due to a ‘run on the bank’ scenario, which would lead big banks and governments to slow the currency down.
The second thing would be the end of easy money. That would push interest rates higher and take the ‘air’ out of the Bitcoin bubble that has turned into a mania.
High interest rates would pile the pressure on Bitcoin – raising the ‘opportunity cost’ of buying.
This would be particularly worrying for those who have borrowed cash to purchase Bitcoin. Such investors would be presented with ‘margin calls’ should the value plummet suddenly.
Mourdoukoutas is not the only economics expert to advise caution to those looking to enter the Bitcoin market. Many have likened the current craze to the dotcom bubble, or even the Dutch Tulip Mania of the seventeenth century.
Some experts argue its value will be short-lived and unstable because Bitcoin isn’t a standardised or widely accepted currency.
The legitimacy of the virtual currency is still uncertain, however it is starting to make its way into hedge fund portfolios.
Only last Friday, it was announced how the main US derivatives regulator would now be permitting both CME Markets and CBOE Global Markets to launch Bitcoin Futures contracts.
According to The Sydney Morning Herald, CMC Markets’ chief market strategist in Sydney Mick McCarthy has said:
It took a long time to establish the methodology and the way bitcoin was traded. The original appeal came from the fact they were unregulated. However it’s clearly moved out of those shadows and into centre stage,
We are in the throes of a bubble market, and one of the characteristics of a bubble market is that there is no way to know when the bubble will burst.
Has your interest in Bitcoin peaked yet, or do you still need some convincing?
CreditsWonderful Engineering and 1 other
The Sydney Morning Herald