Bitcoin Bounces Back After Sharp Slide
After a long slump punctuated by a sharp Friday selloff, Bitcoin and other cryptocurrencies began recovering some losses Saturday morning. Bitcoin’s price had risen 15% to $9,279 at press time, from a Friday low of just over $8,064, according to Coindesk’s index. Cryptocurrencies including Ether and Bitcoin Cash saw parallel recoveries.
It’s too early to say whether that means the cryptocurrency market has found a bottom, after a mania-inflated bubble popped in mid-December at a peak Bitcoin price just short of $20,000. Bitcoin is still off more than 50% from that high – but also up nearly 800% from one year ago.
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The crash of the last six weeks can be broadly interpreted as profit-taking by traders who sensed peak mania, followed by panic selling from late entrants who thought cryptocurrency was a get-rich-quick guarantee but had little underlying faith in the sector. In that atmosphere, superficial negative news (a.k.a. ‘headline risk’), such as Facebook’s ban on crypto advertising, the collapse of bad actors, and misplaced rumors that India would ban Bitcoin likely fed into Friday’s rout.
Looking at the broader pattern of boom and bust in the highly speculative cryptocurrency market, it seems unlikely that today’s rebound will continue into new highs soon, or even a big recovery. For instance, after a near-50% Bitcoin crash in early 2014, the price gradually slumped for more than a year before investor interest began warming up again in late 2016. And while work continues on infrastructure development and fundamental innovations such as Bitcoin’s Lightning Network, cryptocurrency’s promise of frictionless global payments is still likely years away from becoming mainstream reality.