The bitcoin price has dropped from $19,530 to $15,150 within the past five days, since December 17. While analysts have attributed the recent decline to many factors, one major factor seems to be high transaction fees of bitcoin.
Analysts and experts have offered two explanations to justify the recent price decline and correction of bitcoin. Some analysts have claimed that the recent correction was triggered by a sudden increase in the price of bitcoin over the past month.
Since last month, within the past 30 days, the price of bitcoin has increased from $8,000 to $19,000. Even with the latest correction, the price of bitcoin has still recorded a 91.37 percent increase since November 22, as shown by Coinbase below.
As CCN.com reported this week, Pantera Capital CEO Dan Morehead told CNBC’s Squawk Box that the price of bitcoin could fall by 50 percent in the next few weeks. Still, Morehead emphasized that a 50 percent decline in bitcoin would only push back the cryptocurrency by one month, to the price on November 22.
Within the past four years, Pantera Capital and its bitcoin hedge fund recorded a 25,004 percent return, nearly six-fold of the legendary Quantum Fund of billionaire investors Jim Rogers and George Soros.
For decades, Rogers and Soros were praised by the global finance market as legendary and once in a lifetime investors for recording a 4,600 percent return in 10 years. Pantera Capital’s bitcoin hedge fund recorded five times of that in merely four years.
Thus, as bitcoin expert Adam Back noted, the recent price drop of bitcoin can be considered as a major price correction resulted by the recent bull run.
“Buy the dip. people learn drama is meaningless, next time it’s market impact falls until it becomes background noise,” said Adam Back, quoting a statement from highly respected bitcoin and security expert Andreas Antonopoulos which read, “chill out everyone. Nothing of any substance has changed. Just a bunch of new drama, which you should ignore.”
Moreover, Litecoin founder and former Coinbase executive Charlie Lee emphasized last week after a bull run by Litecoin that a strong rally is almost always followed by a bear cycle. An abrupt decline in the price of leading cryptocurrencies such as bitcoin often lasts in short-term.
“Every crypto bull run I’ve seen has been followed by a bear cycle. The market needs time to consolidate. That’s just my experience from 7 years of watching this space. How low and how long it will be is TBD. People need to be aware of this possibility and invest responsibly,” Lee said.
Earlier today, on December 21, ShapeShift CEO Erik Voorhees revealed that average bitcoin transaction fees over the past 12 months have increased to $40 per transaction, to a rate that is higher than most bank wires.
Voorhees expressed his concerns over the rising bitcoin transaction fees, as he wrote , “average bitcoin transaction fees over the past year. Now averaging around $40 per transaction. Higher than most bank wires.”
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