There are following reason why bitcoin is falling
Back in December 2017, when its price reached close to $20,000, bitcoin looked like it had finally disrupted financial markets with the potential to enter the mainstream. A year later and things looked quite different. Bitcoin is now steadily trading below $4,000 and has continuously been on a downward ride over the last year, losing more than half of its market capitalization.
And yet, cryptocurrency enthusiasts seem to ignore the fact that bitcoin could yet enter an even more extreme death spiral. Bitcoin is not the only cryptocurrency whose market capitalization has been hammered. Sell-offs have happened across the board, with the price of major alternative coins such as Ripple and Ethereum falling in the past year.
It is not clear what the catalyst was for these price drops and selling. But what is clear is that cryptocurrency prices struggle to find a floor for many reasons. These range from the rising cost of mining, regulatory concerns, market manipulation, speculative trading, sky-high power consumption, and the increasing skepticism from both the public and the world’s established financial industry.
these are the following reason:-
1- Rising cost of mining
If its price continues to drop and the mining costs do not fall to the same extent, the incentives to update the public ledger and validate transactions can quickly disappear, threatening the very existence of bitcoin as a viable payment system.
Bitcoin is dependent on a system of miners that verify transactions and record them on a digital ledger called the blockchain. This prevents copies being made of the digital tokens. As a reward for the energy and time involved, miners are rewarded in bitcoin.
But the amount of work involved in mining keeps increasing (making it more costly), as the mining process was always designed to get more and more difficult, to limit the number of new bitcoin that get issued. Seeing as mining requires vast amounts of energy, several miners have shut down their operations, as bitcoin’s declining value has made mining less profitable.
2- Regulatory Concerns
Regulators across the world are beginning to act on cryptocurrencies with diverging views. While countries like Switzerland and Malta are trying to become hubs for cryptocurrency businesses, others like China and the US have cracked down on cryptocurrency markets.
A case in point comes from the US markets regulator, the SEC. It announced in November 2018 that operators of two initial coin offerings (ICOs) must pay fines and restitution as they broke the law by selling unlicensed securities. This hardly comes as a surprise. It is likely only the beginning of a decisive intrusion of regulatory bodies in the opaque ecosystem of ICOs. Such a development might be enough to spook some investors to abandon cryptocurrencies altogether.
3 - Market manipulation and speculative activity
These are also important concerns when it comes to the crypto market, which could have been priced into recent performance. My recent research shows how well-informed traders buy cryptocurrencies in bulk, which pushes the price up and gets other buyers to follow suit, until the well-informed traders sell and send the price down, which again everybody follows.
Again, this hardly comes as a surprise. Cryptocurrency markets are incredibly opaque. Anyone paying attention to cryptocurrency trading knows that this kind of pump-and-dump activity and fictitious orders are designed to artificially move prices, exacerbating price swings at the expense of, perhaps unsophisticated, retail investors.