Bitcoin rose nearly 1,800% in 2017 - as of December 24, 2017. Some experts even predict that it could rise to $ 1 million . However, this is just one of many possible developments. Every responsible investor must pay attention to both ends of the potential spectrum. It is certainly conceivable that Bitcoin will continue to rise if everything goes well. But there are also a few reasons that could lead to a crash. Let's take a look at some of them.
You should also remember that it was not so long ago that we had seen a valuation of $ 1,000. The rise of Bitcoin was so fast that we could crash $ 1,000 and still be positive for 2017. Under these circumstances, it is not inconceivable that Bitcoin loses part of its profits - or anything.
- Profit taking
The price of Bitcoin has increased almost continuously in 2017. Therefore, one can assume that there are a few people who sit on a huge Gewinnberg.
Bitcoin is powered by the same basic dynamics that set the price of almost everything: supply and demand. At some point, people who bought Bitcoin some time ago will also sell them to take their profits.
If a significant share of Bitcoin is sold and the supply exceeds demand, then there could be a big downward pressure on the Bitcoin price until the new equilibrium is reached.
- Speculators lose interest (or have no more money)
The other side of the supply-demand equation are the speculators. These buy Bitcoin in the hope that it will be worth more in the future.
With the latest data available, Bitcoin's transaction volume increased by 55% in 2017. An average of 33,000 new Bitcoin wallets were created per day. This has been enough to keep demand above supply. So the rally was maintained. If growth slows in trading volume or trading volume goes down, that could push down the price.
- State regulation spoils the party
The possibility of state regulation is another risk. It could work for or against Bitcoin and other digital currencies. Japan recently recognized Bitcoin as a valid payment method. That's one reason for the current rally.
However, other countries have barely regulated Bitcoin. The US has done nothing but classify cryptocurrencies as investments and issue warnings to investors. If a large country declares Bitcoin illegal, for example, to stop money laundering, it could have devastating effects.
- A big attack takes place
In 2014, the Mt. Gox Exchange processed 70% of all Bitcoin transactions. The activity came to an abrupt halt when the stock market announced that hackers had stolen approximately 850,000 bitcoins. At that time, that was equivalent to about 473 million US dollars and 7% of all available Bitcoins.
It's not surprising that the price crashed then. The attack on Mt. Gox triggered the strongest crash of the bitcoin price so far.
In fairness, it has to be said that bitcoin exchanges have taken measures to become more secure than a few years ago. It is very unlikely that a theft of this size will be repeated soon.
Due to the higher price of Bitcoin but you need not such a big coup to get into the headlines and damage the confidence of Bitcoin investors. If only 100 Bitcoins were stolen, which is 0.01% of what was lost at Mt. Gox, then the headline would read: "$ 1.6 million in Bitcoin stolen by hackers." And this could frighten investors so much that a price collapse is triggered.
- Long transaction times get worse
I've already written in other articles that the long transaction times in the network are hindering widespread adoption as a payment method. Expressed in a simple way; The Bitcoin network, in its current form, is unlikely to handle many transactions. And the growing attention is leading to increasing delays.
It takes an average of 78 minutes for Blockchain.com to process a transaction. But recently, the value was even 1,188 minutes (almost 20 hours) during peak load periods.
You should keep in mind that these delays occur even though Bitcoin is not yet being used as a means of payment. Even a small increase in daily use could lead to massive delays and destroy mainstream acceptance.
- Rising transaction costs
A big advantage of Bitcoin is the low transaction costs. But that's yesterday's snow. Assuming a merchant spends 3% of the credit card payment, but only pennies for a bitcoin payment, that would be a big step forward.
However, this has not been the case for some time, as the value of Bitcoin has increased so much. You now have to pay an average of $ 28 for a transaction. This also applies to small transactions such as sending $ 100.
When investing in equities, it is wise to seek a company that has a lasting competitive advantage. Since the bitcoin network is slow and expensive, there is a risk of losing that benefit if no solution is found.
- Other digital currencies are gaining momentum
Other digital currencies do not have these problems. For example, Litecoin only takes a little over two minutes to complete a transaction. The average cost is $ 0.6. Ripple, a relatively new digital currency, takes just a few seconds and costs less than a penny.
If other digital currencies look better than Bitcoin, then this could even persuade die-hard Bitcoin investors to switch off and turn to other cryptocurrencies.
Only one side of the story
Before being branded a Bitcoin hater, I want to emphasize that this is just one side of the story. Sure, I think Bitcoin might crash (and anyone who buys Bitcoin should take this into account), but the digital currency could also go through the roof and be worth six digits. I've already written at the beginning of the article that Bitcoin could reach $ 1 million or more if the right circumstances occur.
The thing is like in every young and exciting market. There is a lot of uncertainty about Bitcoin's future. It is therefore important to look at all possibilities before getting in.
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