Bitcoin’s recent price plunge isn’t quite like late 2013 as many Bitcoin investors and traders assume.
In November of 2013, the price trend of Bitcoin was nearly identical with the rally of Bitcoin in the final months of last year. On November 25, 2013, Bitcoin reached a price of $988 on most global Bitcoin exchanges, including Bitstamp.
However, when China announced its first “ban” on Bitcoin, the price of Bitcoin dropped 36 percent within 30 days, declining to $625.
As Bitcoin struggled to retain momentum, its price dropped to the low $200’s within a year and remained stable at the $200 trading margin for nearly two years.
The difference between 2013 and 2017
One major difference between Bitcoin’s major price plunge in 2013 and the digital currency’s short-term decline earlier this year is that Bitcoin is successfully retaining momentum in the market, as seen above in the price chart provided by ARK Invest’s Blockchain lead Chris Burniske.
In 2013, the Chinese government and its central bank intended to issue a ban on Bitcoin, and it did, in an attempt to halt trading and usage of Bitcoin within the country. Evidently, the attempt failed, as China is still in control of over 50 percent of the global Bitcoin exchange market.
Regardless of the actual impact on the market of the ruling, investors and traders began to panic and sell Bitcoin, with a misunderstanding that the digital currency can be stopped or banned by the government. At this point, many users were not aware of the structure of Bitcoin and how it was designed to precisely combat government regulation and restriction.
As a result, Bitcoin showed no signs of recovery and the price plummeted down to low $200’s.
Bitcoin is worth more today
Currently, skeptical investors and traders have disregarded the fact that Bitcoin is worth more today than it was a month ago. This morning, Bitcoin passed the $800 mark on Bitstamp, reaching $807.
Today’s Bitcoin rally is tremendously different from 2013 in the sense that the Chinese government does not intend to ban the usage of Bitcoin nor operations of Bitcoin exchanges. The Chinese government has come to a realization that regulating the Bitcoin exchange market and working closely with Bitcoin exchanges will inevitably play into the advantage of the government as underground and over-the-counter OTC markets are significantly harder to regulate.
More importantly, a substantially larger population of Bitcoin users have developed awareness on government restrictions, as many users already see Bitcoin as a global store of value and safe haven asset which can be used to avoid economic uncertainty and financial instability.
At this point, buyers should hold onto their Bitcoins because the decline of Bitcoin is temporary. As the market recovers and the media begin to accurately portray the Bitcoin market in China, the value of Bitcoin will rise in the short-term.