The Bitcoin Price Drop Explained

As the price of Bitcoin continues its heartrending slide, it’s important to remember a couple of things about this nascent technology:
  1. It’s still in its infancy and the infrastructure that is going to give it its real utility and spur its real adoption is still being built out.
  2. Its price at this stage of the game is really nothing more than speculation, and price swings occur with very low valuation trades.
  3. Despite the very exciting news that keeps coming out of Bitcoin startups, the prevailing market conditions are driving the price down.

For this article, we’re going to focus mostly on the third point here, the conditions that are driving the price lower.

Hacks and Scams

Over the last few days we have been seeing some large trades on the various exchanges. Though there is no way to know for sure, there is speculation that the hackers from the recent Bitstamp hack are cashing out their ill-gotten gains as quickly as possible. This is in addition to the disappearance of Cryptodouble.com, a clear Ponzi scheme that has been running for the last few months and seems to have made off with a few thousands of BTC.

In the past, such scammers might have been satisfied to hodl their stolen lucre, but with the falling prices they may be trying to get out while the getting is good. If this is the case, given the small size of the Bitcoin market and the fact that a majority of Bitcoin users are not users at all but holders, the sale of just a few hundreds of bitcoins can noticeably impact the price.

Miners Paying the Bills

Also, as the price declines, miners, who have invested large sums of money in their equipment, need to pay the rent, the electricity, and the upkeep of their machines. CEX.io has recently announced that they are going to soon suspend their cloud mining services as the low-price point has made it unprofitable, signaling just how dire the situation may be for many miners. Currently there are 3,600 coins mined per day, and if any significant portion of those need to be sold to keep things going, then that would account for a constant downward pressure on the market.

Soft User Adoption

As much as those of us on the inside of Bitcoin believe that it’s going to revolutionize the world and that everyone should aspire to hold even a fraction of a coin, the compelling need for most people to buy in just hasn’t appeared yet. This speaks to one of the core theses of Bitcoin Warrior