The bitcoin price has dipped below $13,000 for the second time in December, following the December 23 correction which led the price of bitcoin to plummet to $11,500.
Analysts have attributed the recent decline in the price of bitcoin to the unexpected surge in the valuation of several cryptocurrencies including Ripple and Cardano.
Over the past 24 hours, the market valuation of Ripple has increased by nearly 100 percent, surpassing $100 billion in market cap. While it has corrected since then, the market valuation of Ripple still remains above $89 billion, more than $23 billion higher than that of Ethereum.
Apart from the one brief period in November during which Bitcoin Cash overtook Ethereum for several hours, Ethereum had not given up its position as the second most valuable cryptocurrency behind bitcoin throughout the past 12 months. Yet, Ripple remains as the second most valuable cryptocurrency behind bitcoin 24 hours after it has initially taken over Ethereum.
For the first time since June, the dominance index of bitcoin over the cryptocurrency market has dipped below 38 percent. At the time of reporting, the dominance index of bitcoin is 37.9 percent, and is close to achieving an all-time low at 37.39 percent.
Historically, bitcoin has demonstrated a trend in which the value of bitcoin surges when other alternative cryptocurrencies drop. In contrast, when the value of alternative cryptocurrencies decline, the value of bitcoin has tended to increase.
As such, given that the recent fall in the price of bitcoin was mostly triggered by FOMO or fear of missing out demonstrated by a small portion of bitcoin investors switching over to Ripple, the bitcoin price will likely be able to recover to the $15,000 relatively soon, especially if the market cannot sustain the valuation of Ripple at around $90 billion.
Analysts have been extremely optimistic about bitcoin in 2018 for many reasons, mainly due to the rapid adoption of the cryptocurrency by major financial institutions such as the New York Stock Exchange (NYSE) and Chicago Board Options Exchange (Cboe), two of the largest stock markets and options exchanges in the global finance market.
As many billions of dollars in institutional money flow into the bitcoin market, analysts expect the market valuation of bitcoin to surge, potentially to the $1 trillion region, as sugged by billionaire investor Mike Novogratz and prominent financial analyst Max Keiser.
Currently, the main roadblock for bitcoin adoption and price recovery is said to be the scalability issues of the Bitcoin network. Although it still settles a volume of transactions in orders of magnitude larger than its competitors like Litecoin and Bitcoin Cash, its blockchain is congested and the transaction fees remain large.
In fact, ShapeShift, the SegWit-enabled cryptocurrency exchange, has recommended users to prevent exchanging bitcoin for an amount less than $250, due to the high fees.
If the Bitcoin network can be scaled efficiently in 2018 and the fees drop to less than $1, back to where it was earlier this year, bitcoin will likely be able to regain its dominance over the cryptocurrency market.
Last modified: May 20, 2020 9:14 PM UTC