Last December bitcoin reached its highest levels ever but as of the past few weeks, the price of bitcoin and other digital currencies have been plummeting.
There are three main reasons for the recent crypto-devaluation: government regulations, theft and price manipulation.
$100 Billion Gone
Just today (2/2/13) over $100 billion worth of bitcoin value went bye-bye over worries of price manipulation and ongoing government regulations. The overnight price drop totaled 13%, the weekly decline extended to 25%, and the monthly fall to over 40% off its highs in December of last year.
The question still remains as to whether or not the bitcoin run has ended or not.
If the yearly price increase is taken into account, it seems that bitcoin is only experiencing a slight bump even a correction of some sort. Over the past year, the price of bitcoin has risen well over 700% even when taking its recent price drop into account.
Still, the price has finally dropped below its November high, just before its December price surge. This has left many investors wary as to whether or not this might mean the end of the bubble or even signs of a huge plummet ahead.
Whatever the case may be, cryptocurrency investors are not so exuberant about bitcoin and many of the other digital currencies as they were the year before.
Not Just Bitcoin
As Bitcoin fell below $9,000 yesterday, many other notable cryptocurrencies followed suit. In just one day, Ethereum fell by 22%and Ripple dropped by 32%.
The price drop has not just been driven by the end of optimism over the future of cryptocurrencies but real issues threatening its future.
It is well known that Asian countries like China and South Korea have already put policies into play to regulate the trading of digital currencies within their countries in order to reduce the risk of speculation and battle financial criminal activity often associated with unregulated markets.
Now, India has also made threats that it too seeks to draft up policies in order to limit criminal activities associated with digital currency trading within its borders.
What is more, cryptocurrency investors are worried that the price of bitcoin and other digital currencies have been manipulated by large market exchanges like Bitfinex making it extremely difficult to estimate its value and therefore reducing what once was a long-term investment asset to a short-term speculative trade.
On top of all this, crypto-hackers recently invaded a Japanese cryptocurrency exchange and looted over $500 million worth of digital currencies.
Theft, regulation, and manipulation have definitely put the brakes on the crypto-craze and slowed down the buying frenzy that could have been the shortest bubble to ever hit financial markets, regulated or not.