Bitcoin Is Sitting On The Edge Of A Cliff

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It is hard to imagine that the price of Bitcoin was at over $19,000 per token in December 2017. The wild and unprecedented appreciation of the digit currency took the value from only five cents in 2010 to the dizzying heights at almost $20,000 in late 2017. The success of the cryptocurrency bought many other tokens to the market. These days, there are over 2,000 other digital currencies in the market. By late 2017, the market cap of the burgeoning asset class hit an astonishing $800. It seemed that it was only a matter of days or weeks before it eclipsed the $1 trillion level given the trajectory of gains. The price of Bitcoin rallied as two futures exchanges rolled out futures contracts, but the aftermath has been ugly for those holding the cryptocurrency.

Gravity hit Bitcoin, and its digital currency brethren like a ton of bricks and the price dropped throughout 2018. 

Source: Barchart

As the chart of Bitcoin shows, a $100 investment in the cryptocurrency in 2000 when it was at a nickel rose to an astonishing $39,724,000 in late 2017 when it traded to $19,862 per token. However, on January 17 with Bitcoin trading at $3647.87 level, it was worth just under $7.3 million, still not a bad return. However, the frenzied buying when the price traded north of the current price from September 2017 until recently means that many investors who came late to the party are nursing significant losses.

Bitcoin traded to a low at $3158.10 in December which is now the level of critical technical support in a market that has been making lower highs since the final month of 2017. There continue to be divergent opinions about the future path of Bitcoin. While Warren Buffett called digital currencies “financial rate poison” others believe that it is only a matter of time before it turns and climbs to higher highs. So far in 2019, the price range has been from $3487.60 to $4,114.72, which is still a significant band for traders who take advantage of the daily peaks and valleys in the market. As of January 17, Bitcoin declined by 82.4 percent. The total market cap of the asset class stands at the $122.9 billion level, a fraction of where it was at the highs. Bitcoin’s share is around 52 percent of the overall market.

Whether Bitcoin is “rat poison” or gold depends on where an investor purchased their position. However, for a trader, the market continues to offer wide price variance which is the mother’s milk of trading profits. The blockchain technology that underpins Bitcoin and the other digital currencies continue to gain acceptance and utility in many markets. Proponents have argued that a rejection of Bitcoin and the other members of the asset class amounts to throwing out the babies with the bathwater, but it is hard to stand in front of the price trend that destroyed the value of digital currencies as investment assets.

At just under $3500 on January 17, Bitcoin is sitting on the edge of a cliff. The digital currency needs to recover to avoid falling further into an abyss that will stand in the way of establishing the asset class as a viable alternative for the future. Meanwhile, so long as the daily price ranges continue to offer opportunity and there is liquidity, Bitcoin remains an attractive instrument from a trading perspective.


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