Bitcoin is known for its rapid rise and sudden drop, but in the past few months, prices have not shown much upward momentum. Since Bitcoin broke $20,000 in December 2017, people have been waiting for the bull market to return. However, there are some things that can cause prices to fall. This is why Bitcoin may not reach new heights very quickly.
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Strange case of bitcoin price
Since its inception, Bitcoin has been known for its huge price volatility. For Bitcoin, it is not uncommon to grow ten times and then drop by 90%.
The historical peak of Bitcoin appeared at the end of 2017 and reached about $20,000 before falling back to the bottom. After that, the price began to fall. At the end of the day, Bitcoin fell to its lowest point below $4,000.
However, since the fall to the bottom, Bitcoin has slowly recovered. For most of 2019, prices have rebounded between $7,000 and $11,000. Many people expect that good times will come back soon. However, a large part of the community remains skeptical.
1. Slow adoption of institutional investors
Over the years, there has been a lot of discussion about institutional investors entering the field of cryptocurrencies. The properties of Bitcoin, such as decentralization and security, make it an excellent investment tool for all traders. However, the agency is still reluctant to go all out. Some progress has been made in the field of cryptocurrencies, such as institutions that offer investors bitcoin futures contracts and other cryptocurrency derivatives. Many people hope that the launch of the Bakkt platform will attract investors, but the start is very difficult.
There seem to be two main reasons why institutions continue to remain cold. The first is the unknown caused by investing in Bitcoin. Although Bitcoin has been around for a decade, Bitcoin and other cryptocurrencies are still an experiment. No one knows the fate of Bitcoin. It may take MySpace's path and pave the way for another cryptocurrency to dominate. Or, the entire cryptocurrency market may disappear, causing the experiment to fail.
Another issue for many organizations on Bitcoin is the hosting issue. Many traditional assets are insured or supported by the government or other large institutions. These companies can rest assured that the stocks they hold are highly unlikely to be hacked or stolen, but for cryptocurrencies, the situation is quite different.
For the average user holding a considerable amount of bitcoin, a simple hardware wallet plus a small amount of backup is enough to ensure the security of the coin. However, large organizations with millions of dollars in cryptocurrencies need to take greater security measures to secure their funds.
Companies like Coinbase and other companies have begun offering hosting solutions that are already popular. On one occasion, Coinbase received millions of dollars in client money each week. However, hosting issues remain a concern for institutional investors.
2. Technical dilemma
In order to expand the network, Bitcoin has almost all its confidence in the second layer of technology. Layer 2 technologies such as Lightning Networks and Blockstream's Liquid network allow transactions to be carried out under the chain, reducing the pressure on the main chain. However, these technologies are not without their own problems, and have barely been popular in the past 18 months.
Regardless of which metric you use, the lightning network has been completely stagnant for six months. Since April, the number of nodes has barely increased and is currently below 6,000.
Since April, the total number of channels, total network capacity and average channel capacity have been declining. After reaching a new high of 1000 BTC capacity, the capacity of the network dropped and continued to drop to today's 818 BTC.
Without sufficient expansion solutions, many investors may be concerned about the future viability of Bitcoin and whether it can compete with Visa.
3. Overall bitcoin market sentiment
In addition to all the problems that Bitcoin currently faces, there are market sentiment problems, and there seems to be insufficient speculation to push Bitcoin back to $10,000.
At the beginning of June this year, bitcoin prices rebounded to $13,800, and industry commentators hoped that the “Encryption Winter” officially ended. However, since the peak of the year, as the bears squeezed momentum out of the market, this leading cryptocurrency has returned to the downside spiral.
When Bitcoin initially reached $20,000, the hype surrounding cryptocurrency was not unexpected. It seems to have reached the mainstream, and a large number of non-technical investors are scrambling to invest in this new thing. Various news reports are discussing the topic, and the headlines are endless, and the number of new users on the exchange is millions per day.
However, today's cryptocurrency market does not seem to have a fever. There haven't been too many things in this area that will cause investors to soar again. We will have to wait and see, and the next step will stimulate a new wave of investment in digital currencies.