Bitcoin Breaks Below $10k, Time To Panic?

After a heady end to 2017 for Bitcoin, with prices peaking at around $20,000, January of 2018 has been a dismal month. In the first month of 2018 the world’s #1 cryptocurrency has reached new low after new low, most recently dropping below the key psychological level of $10,000.

After reaching a critical mass of popular awareness, Bitcoin and cryptocurrencies in general are now in the spotlight. The recent plunge in the price has many people questioning what the future may hold for Bitcoin after coming off such dizzying heights.

The Most Popular Story

The most widely accepted story currently circulating about Bitcoin’s sudden fall is that it is a victim of its own success. The recent explosion in price and the corresponding dramatic rise in public awareness has increased the interest and concern of governments and their regulatory bodies.

Under this narrative, Bitcoin and other cryptocurrencies are now so widely accepted that there will be a natural retracement period as they become integrated and regulated in the mainstream economy. This slowdown period will feature muddled prices, while investors wait to see how exactly the regulation of Bitcoin plays out.

The Bubble Story

The less popular and more pessimistic story is that Bitcoin is crashing from a spectacular bubble that peaked at $20,000, and the recent drop below $10,000 is only the start. Under this narrative, the explosion in Bitcoin’s price during 2017 was based on nothing but hot air, and the rapid decline in the first month of 2018 is a long overdue correction after reaching the blow-out top at the end of 2017.

Which Story to Believe?

Both of these stories about Bitcoin’s rapid increase in 2017 and sudden decline in 2018 are plausible. Ultimately it is up to the individual investor to decide which narrative of Bitcoin’s recent history they believe.

Either way we should soon know whether this is merely a pause in price as Bitcoin clears regulatory hurdles or whether this is just the beginning of an on-going decrease in a burst bubble of Bitcoin and cryptocurrency irrational exuberance.