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Highlights
- The drop back below fifty shows Bitcoin has yet to fully recover from a slump that began after it hit a new all-time high in November
- Bitcoin’s decline over the past four weeks followed fresh comments from SEC Chairman Gary Gensler surrounding regulation
- The passing Biden’s US$1.2 trillion infrastructure bill meant that crypto traders (a.k.a crypto exchanges) are now required to notify the IRS of any crypto transactions
Bitcoin briefly nudged its way past the US$50,000 this morning, before dropping once again to a tad below that point.
The drop below fifty shows that Bitcoin has yet to fully recover from a slump that began after it hit a new all-time high in November.
Putting aside the fact that Bitcoin, and cryptocurrency in general, is inherently a volatile asset class, the question remains: why has Bitcoin slumped in the past four weeks after such an epic climb to the top?
The Breakdown of Bitcoin’s Journey
The past four weeks have been a dramatic drop for the world’s number one crypto. In the context of 2021, however, it’s merely another twist in a year that’s had more twists and turns than a corkscrew at a Hunter Valley winery.
To look at a price graph of Bitcoin, it doesn’t look dissimilar to someone climbing to the top of Everest, spending two seconds at the peak, and then descending the other side.
That short-lived peak, incidentally, was Bitcoin’s all-time high of US$68,789.63 on November 10. At that point, there was a feeling amongst the Bitcoin bulls that the ascent might well continue on to US$100,000. And yet, from there, Bitcoin, has descended to today’s price of just under US$50,000 with free falls in there for good measure.
Why is Bitcoin doing this to us?
For those of us Bitcoin owners with enough of a functioning nervous system left, following a year of more ups and downs that a Pitt Street elevator, we’re left asking the question: why? For the love of God, why won’t Bitcoin just stay steady?
As it turns out, amidst all the mayhem, there are some reasons why Bitcoin is dropping.
Regulation Uncertainty
Bitcoin’s decline over the past four weeks, were immediately preceded by fresh comments from SEC Chairman Gary Gensler surrounding regulation.
Some, including executives from Coinbase Global and FTX Group — two of the world’s largest crypto exchanges – have suggested that Bitcoin’s recent drop directly results from a war of jurisdiction between different regulatory bodies.
Biden’s Infrastructure Bill
In November, US President, Joe Biden, signed a US$1.2 trillion infrastructure bill, which included some new legislation surrounding crypto.
The passing of the bill meant that crypto traders (a.k.a crypto exchanges) are now required to notify the IRS of any crypto transactions. This, in turns, makes it more difficult for investors to hide any capital gains which they might have previously got from cryptos, like Bitcoin.
Omicron Concerns
The other big variable is the new Omicron strain of the Coronavirus, which has been loose in the US since late November.
On November 26, the US stock market took a clouting as the Dow Jones dropped around 2.5 percent while the S&P 500 and NASDAQ markets fell around 2.2 percent.
Although traditionally, the crypto space remains largely unaffected by the ebbs and flows of the stock market, this still might well have contributed to Bitcoin’s most recent fall from grace.
The Verdict
Anyone who’s spent considerable time studying Bitcoin should know by now that the past four weeks is par for the course when it comes to volatility.
Despite Bitcoin’s recent decline, the year-to-date returns of Bitcoin sit at around 80 percent, which far outweighs that of property, shares or gold. Put into that perspective, Bitcoin still remains solid in a year.
