Bitcoin investors’ hair is falling out. Rising charts reversed direction last week and haven’t looked back. Is bitcoin in a crash? We’ll look at some technical analysis and consider the recent news to determine whether or not you should jump ship. But markets come and go, and while you should stay aware of what’s going on, don’t panic.
Why bitcoin is crashing
Right now, the largest player in Bitcoin is China. What China does has a huge impact on the market. We mentioned that China recently moved to regulate ICOs (#2 on the chart). That put some negative pressure on the currency, right after it had nearly cracked an all-time high of $5,000 (see #1 on the chart). Combined with people selling to collect profits at those record-breaking levels, the trend started to turn. You can see that here.
Still, bitcoin prices didn’t plummet. They found a nice natural support line around $4,400 and hovered between there and $4,700 for a few days. Then it got ugly.
Rumors slipped out that China was going to close Bitcoin exchanges in the country. On September 11th, those were confirmed and BTC-China (BTCC), the largest exchange in China, announced its closure. Since then the BTC price has dropped like a brick in the ocean.
Why China matters
Chinese exchanges like OKCoin and BTCC might not crack the top of the exchange lists, but don’t let that fool you. Chinese players are responsible for at least half the trades in bitcoin on exchanges. Exchanges alone don’t tell the whole story, however. Many trades occur over the counter, in other words through personal transactions or local exchanges. Again, Chinese volume here is powerful. Localbitcoins China saw incredible volume spikes since 2014 when it opened.
The sheer number of people in China makes this possible. It also allows for many mining operations. Since the payout for mining has relatively more buying power in China, the Chinese process more of our transactions than anywhere else in the world. So when China says it’s cutting back on Bitcoin, the whole network is put at risk.
Will the Crash Continue?
As of the time of this writing, the crash has erased all the gains of the last month. While that has people in tears, it could be the end. Long-term bulls who bought in around $3,000 haven’t really lost anything. So they’re likely to stick around. But if the bad news keeps pouring in, don’t be surprised if they abandon ship now. They likely have stop-loss sales ready around $3,000. Should prices start to dip below that, a massive sell-off could occur.
Understand that a market crash is brought on by fear and uncertainty. This latest news has definitely injected some fear into the equation. But is this fear rational? Yes and no. China will likely continue to shut down bitcoin in the country, but just because China does it doesn’t mean the currency should fail. Nor does it mean other countries will follow suit.
Why China wants to ban exchanges
The problem for China is that bitcoin allows people to skirt the rules of their strictly controlled economy. The last thing China wants is for people to send their money out of the country. They want it reinvested into China. A Chinese exchange hooked up to Chinese banks makes it easy to send money elsewhere.
But you don’t need an exchange to move your money. Anyone in China could simply buy bitcoin privately over the counter and send it away.
So while stopping the exchanges is going to slow people down, it’s not going to stop them. Which is why I believe China will continue to push against bitcoin transactions.
Mining, however, cannot be stopped. Since that never involves fiat currency, there’s no risk to the network.
The crash will stop when traders see the bigger picture: China isn’t bitcoin. It might take us until the end of the month to see the light, as Chinese volume is going to exit the market hard in the following weeks. Stay tuned.
How does the crash affect modafinil?
Here’s the good news: We’re still all in. However, due to higher volatility, you should buy the bitcoin you need and use it immediately. We will continue to accept bitcoin payments, regardless of the market. We’re bigger than our fears.