After a period of strong growth, the price of the world's largest and most famous cryptocurrency is plummeting. Bitcoin, known for its extreme volatility, hit new highs of €41,962 just three days ago, but has now fallen just above the €30,000 threshold. The digital currency has posted losses of more than 20% in the last 24 hours alone, wiping out around €130 billion in market capitalization, according to data from CoinMarketCap.
Bitcoin price
Ever since Bitcoin arrived on the scene, a debate has raged over whether its meteoric price spikes constitute market bubbles (when the value of an asset becomes grossly inflated) or truly representative of the role it plays. Crypto could play in the financial ecosystem in the future. Some will assume that today's events prove that the latest Bitcoin bubble has burst. Others, however, claim that these price changes are natural and will occur frequently on the way to Bitcoin's final valuation. “Bitcoin often exhibits large upward fluctuations that tend to be followed by corrections. This is normal behavior for a new technology at the beginning of its adoption curve,” said Antoly Crachilov, CEO of asset management company Nickel Digital. “Only professional investors with a long-term view of the underlying technology should be exposed to this asset class. They also need high levels of risk tolerance and, most importantly, they never lose sight of the forest for the trees. The problem, however, is that the volatility of cryptocurrencies like Bitcoin can only pique the interest of retail investors, whose ability to absorb sizeable losses pales in comparison to their institutional counterparts. Most famously, after reaching highs of €19,783.21 in December 2017, Bitcoin fell below €8,000 in just two months. Investors who made it to the top saw 60% of the value of their investment disappear. The same will probably have happened to many investors who thought the milestone of over €40,000 a few days earlier was just the next step on the road to much higher valuations.