Bitcoin has made somewhat of a recovery over the last 2 trading sessions after falling to a six month low which now has the market wondering again, is bitcoin an investment that can be trusted.
It seems as if the latest sell off was caused by comments out of China with representatives of People’s Bank of China warning that they will be cracking down hard on bitcoin and cryptocurrency trading in the country.
The Chinese central bank has recently shown a big interest in blockchain technology but has warned the market not to confuse this with Bitcoin and Crypto
"Recently, in the process of promoting blockchain technology, virtual currency speculation has shown signs of rising. Investors should be careful not to mix blockchain technology with virtual currency." Representatives from the bank noted
It seems the main driver of the Bitcoin at the moment is China as the reason the price jumped above $10,000 briefly last month was because Chinese President Xi Ping called on his country to quickly move forward with the development of blockchain.
“This was one of the worst weeks in the history of digital assets. The market is clearly in contraction, with no new money coming in to soak up the supply.” Said Jeff Dorman, chief investment officer of Arca.
“Bitcoin has a history of strong comebacks from big sell-offs. The cryptocurrency gained 70% in the four months following a 16% loss in 2016 and similarly an 89% gain in the four months after a 22% sell-off in 2015” Dorman said.
Before the latest price drop, Bitcoin had shown a relative period of stability which considering the historical wild volatility, was a good sign for the cryptocurrency as the more stable it becomes, the more it will be adopted by the wider market.
One analyst believes we are close to a bottom after this latest sell off and the formation of a bull market may be in the making
"We essentially went from $5,000 to $13,500 in three months and now, like the swing of a pendulum, the market wants to know where the bottom price is. In my opinion, we are in the early stages of a bull market. The bottom this time will be much higher than $5,000 and we will find higher lows all the way back to all-time highs." George McDonaugh, CEO of blockchain investment firm KR1
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