If one is going to play around in cryptocurrencies, a place where 50% gains in a day sometimes happen, one must conversely expect at least 50% losses in a day too. (And worse than that.)
Given the number of people talking about (and buying) cryptos lately things feel super bubbly. Many people are coming into the space with no understanding at all of what is behind cryptos, why some cryptos are better than others, or practically anything. They are simply enticed by big gains. That will spell doom for some.
As for yesterday’s crash, my completely unscientific assessment is that since “Bitcoin” is still largely a retail play, though funds and institutional guys are coming in, people are taking gains and buying Christmas gifts. Seriously.
Below Eddie Murphy explains the principle.
Bitcoin’s price has rebounded by over 40% in the last 24 hours, climbing from a low under $11,000 to over $15,300 at this writing. That followed a steep five-day drop of more than 40% from record highs of over $19,600, as measured by Coindesk’s index.
After the crash and rebound, investors who bought Bitcoin as recently as late November have still seen nearly 80% returns. A broad spectrum of other cryptocurrencies, including Ethereum and Litecoin, have seen parallel recoveries.
During the crash, the major exchange Coinbase experienced an outage due to high traffic – possibly an indicator of its huge crop of new investors panic-selling. But such wild swings are nothing new for Bitcoin, and even in the midst of the crash, longtime advocates on Bitcoin forums were celebrating the price drop as a “discount” and urging each other to “buy the dip.”